Monday market update
Don't call the retail recovery ... yet
3 minutes to read
Tracking the UK recovery
Economic forecasting group EY Item Club said it now expects the UK economy to shrink 11.5% in 2020, an increase on the 8% contraction it expected back in mid-June, citing May's underwhelming growth figures. It now expects the economy to grow 6.5% in 2021, up from its previous forecast of 5.6%, with the economy returning to pre-pandemic levels in 2024. The strongest evidence for impending growth comes from gauges of confidence and demand - ranging from surveys of households to credit card spending data - that show a recovery is underway.
EU and US fortunes start to diverge
The outlook in Europe looks brighter after EU members reached agreement on a 'monumental' recovery fund last week, which pushed the euro to a two-year high. Rome’s 10-year borrowing cost, a barometer of fears for the eurozone's heath, fell to the lowest since before the pandemic at less than 1%. The US has outperformed the euro area in 20 out of the past 28 years and economists now say a reversal in fortunes is underway. JPMorgan expects the euro area’s economy to shrink 6.4% this year, slightly worse than the 5.1% contraction seen for the U.S. But for 2021, the bank forecasts a 6.2% rebound, more than double America’s 2.8% growth.
UK property's recovery in context
We talked last week about the UK’s property market recovery, as official data showed residential transactions climbing 32% in June from a month earlier. Despite that jump, June's 63,250 sales were still 36% below those in June 2019. In this morning's Residential Market Outlook, Tom Bill looks at what leading indicators can tell us about when the market will return to normal levels of activity. Things are moving in the right direction: in the week ending 18 July, the number of UK exchanges was 18% below the five-year average, Knight Frank data shows. That compares to an equivalent decline of 42% in mid-June.
Don't call it a retail rebound, yet
Knight Frank's Head of Retail Research Stephen Springham has a blistering take on the latest retail figures that offers clues as to what's really happening on the high street. Month-on-month figures and those including fuel massively distort the underlying picture, and should be taken with a pinch of salt, he says. Stephen covers the diverging fortunes of the grocery and non-food sectors, the rise of online grocery shopping, and why the retail sector has returned to a deflationary environment. All-in-all, the sales figures illustrate a step in the right direction, rather than a rebound.
Residential development during a crisis
We have an East-West London focus for today's Intelligence Talks podcast. We look at key regeneration opportunities and consider how housebuilders and developers are navigating Covid inspired pressures in these areas. Our guest speaker Steve Curran, leader of Hounslow Council in West London and cabinet member for regeneration and planning, shares his perspective on housing targets, outlines his key concerns and has a lively conversation with James Barton and Ollie Knight about the planning system. Plus Ollie gives an overview on how housing development performed in the second quarter and near-term. Listen on Apple, Acast and Spotify.
In other news...
The stand-off over travel to Spain.
Another blow to US/China relations fuels demand for haven assets.
Any questions, please contact me, or the team.