UK retail sales bounce back but economists fear grim autumn ahead – as it happened

Jasper Jolly

from on 2020-09-18 14:03 (#589G4)

Rolling live coverage of business, economics and financial markets as retail sales volumes rise by 0.8% in August

3.03pm BST

The continued rebound of UK retail sales has offered hope for a V-shaped economic recovery, but economists are increasingly questioning whether it is sustainable as reasons for Britons to refrain from spending multiply.

Retail sales volumes increased by 0.8% compared to the previous month, the Office for National Statistics (ONS) said, thanks in part to DIY shopping sprees. That growth was down from the 3.7% increase over July or the surges of 12.1% and 13.9% seen in May and June.

2.33pm BST

As expected, Wall Street has gained at the opening bell. Here are the snaps from the newswire:

2.27pm BST

The White House's battle against Chinese tech companies could escalate over the weekend, after the US announced that WeChat and TikTok will be banned from app stores on Sunday.

The Chinese Communist Party (CCP) has demonstrated the means and motives to use these apps to threaten the national security, foreign policy, and the economy of the US. Today's announced prohibitions, when combined, protect users in the US by eliminating access to these applications and significantly reducing their functionality.

Today's actions prove once again that President Trump will do everything in his power to guarantee our national security and protect Americans from the threats of the Chinese Communist Party.

2.12pm BST

Got any 2ps or 2s in your pocket? You aren't alone.

2.04pm BST

The FTSE 100 is still in the doldrums, down by 0.4% at about 6,028 points, but it looks like US stocks are on course to gain ground when they open shortly.

Futures suggest the tech-focused Nasdaq will gain 0.5%, while the main benchmark, the S&P 500, will rise by 0.2%. The Dow Jones industrial average, which is more sensitive to single-stock movements, is roughly flat.

1.02pm BST

The EU has signed a deal with drug companies Sanofi and GlaxoSmithKline to provide as many as 300m doses of a possible coronavirus vaccine.

Member states also have the ability to donate reserved doses to lower- and middle-income countries, an option if other vaccines such as one being developed by Oxford University and AstraZeneca are successful.

Second #COVID19 vaccine contract signed with @sanofi.

Another step closer to delivering a safe and sustainable exit strategy from the crisis for and citizens.
https://t.co/ELdgozCsot pic.twitter.com/hh2kwP7RJk

With today's contract with Sanofi-GSK, the European commission shows once again its commitment to ensuring equitable access to safe, effective and affordable vaccines not only for its citizens but also for the world's poorest and most vulnerable people.

Agreements with other companies will be concluded soon and build a diversified portfolio of promising vaccines, based on various types of technologies, increasing our chances to find an effective remedy against the virus."

12.56pm BST

Former Labour deputy leader Tom Watson, who accepted an advisory role with the owner of Paddy Power this week, previously described the company's actions as dirty" and money-grabbing" after it took bets on the murder trial of former athlete Oscar Pistorius.

12.47pm BST

Foreign-based cannabis firms could potentially be allowed to float on the London Stock Exchange - provided they produce medicinal cannabis or cannabis oil, and the financial watchdog is satisfied they aren't breaking UK law.

12.38pm BST

The possible imposition of new restrictions on hospitality venues across England would unfairly hit night clubs, pubs and bars, according to the head of a trade association representing venues.

The BBC reported that new England-wide measures are under consideration that could see hospitality businesses shut to slow a surge of coronavirus cases.

We have been monitoring discussions over further restrictions across the UK, in particular around the night time economy. While we in no way endorse any compromise on public health we have to consider the evidence presented which seems to be unfairly focused on the businesses within the wider hospitality sector.

There is clear evidence both within the UK and internationally that transmission beds are within households. This is supported by discussions with Public Health England and in particular, statistical evidence from countries like Switzerland, where 27.1% of infection is in households, 1.9% in nightclubs, and 1.6 % in bars.

12.15pm BST

Shares in airlines, hotel groups and pub companies have tumbled, after it emerged that the government is weighing up tough new circuit break" restrictions to avert a second wave of Covid-19 infections.

International Airlines Group, which owns British Airways, was the biggest loser on the FTSE 100, down by more than 10% by the early afternoon, while the aircraft engine maker Rolls-Royce was not far behind, down 5%, and easyJet fell nearly 8%.

11.53am BST

The World Trade Organisation (WTO) has narrowed down the candidate list for the global body's director general, with three women and former UK minister Liam Fox among the shortlisted candidates.

11.47am BST

There are fair few interesting insights in the latest furlough scheme data update.

11.16am BST

In a press release (that did not mention the 4.8m workers still absent from work) chancellor Rishi Sunak said the figures showed the furlough scheme was a success".

He was focusing on the number of workers in the retail industry on furlough, which halved from the start of the pandemic from 1.85m to 789,000.

These figures show the success of our furlough scheme - making sure people's jobs are there for them to return to.

That so many businesses have been able to get back to trading, and bring their staff back to the workplace is a testament to the impact the scheme has had.

11.15am BST

The latest figures from the UK Treasury show that as many as 5.3m workers remained on furlough at the end of July, although nearly a million returned to part-time work as the government started to wind down the scheme.

The scheme, introduced to save jobs during the government-imposed lockdown, paid 80% of furloughed workers' wages up to 2,500 per month. The number of workers furloughed under the coronavirus job retention scheme peaked at 8.9m on 8 May but fell to 4.8m by 31 July.

10.30am BST

It is not just Ryanair that is taking a bit of a battering from the increase in restrictions across Europe: British Airways owner International Airlines Group has now lost 10%.

9.57am BST

The FTSE 100 has fallen by 0.36% so far this morning, with a mixed picture across European stocks.

One reason for the stock market selloff in the UK may be the growing prospect of new coronavirus restrictions across the country. Health secretary Matt Hancock was this morning asked if he was considering a new national lockdown. He said:

I have learned over the last nine months not ever to rule anything out. However, it is not the proposal that's on the table.

This is a big moment for the country. We are seeing an acceleration in the number of cases. And we are also seeing that the number of people hospitalised with coronavirus is doubling every eight days. We are now starting to see the effects in hospital.

9.51am BST

Ryanair, Europe's largest airline, has cut its flight schedule for October by 20%, as it compared Irish travel restrictions to the North Korean dictatorship.

As customer confidence is damaged by government mismanagement of Covid travel policies, many Ryanair customers are unable to travel for business or urgent family reasons without being subjected to defective 14 day quarantines.

While it is too early yet to make final decisions on our winter schedule (from November to March), if current trends and EU governments' mismanagement of the return of air travel and normal economic activity continue, then similar capacity cuts may be required across the winter period.

9.39am BST

Some news from this morning for stock exchange followers: the London Stock Exchange Group is getting closer to selling the main Italian bourse to French rival Euronext.

Dubbed Project Botticelli", the LSE's sale of the Milan stock exchange is politically sensitive in Rome because of concerns about who could take control of Borsa's bond platform, which handles trading of Italy's government debt.

The LSE is selling Borsa as part of regulatory remedies to see through its $27bn purchase of data provider Refinitiv. Offers for Borsa valued the Italian exchange up to 4bn (3.7bn), sources had said before the LSE board met on Thursday to review the bids on the table.

9.30am BST

NatWest Group, formerly known as Royal Bank of Scotland, is reportedly considering winding down its Ulster Bank business in the Republic of Ireland, after it became more challenging to turn around the struggling lender during the pandemic.

9.06am BST

And the ONS also has some handy analysis of how different parts of the retail sector have been affected by the pandemic. There have been some big winners, but also a lot of losers.

Non-store retailing has surged, but apart from food every other part of the sector has suffered a big decline in sales that still has not been made back, even as shops have opened.

.@jathers_ONS concluded: 3/3 pic.twitter.com/06wK9fKv0s

8.49am BST

Could there be a double dip in retail sales? That would certainly be one potential upshot of rising unemployment.

Here is the picture so far for overall sales volumes:

8.43am BST

The August retail figures show that the UK retail industry had a stronger summer than might have been expected, but by most accounts it looks much less appealing as winter approaches.

With the government's test and trace operation suffering from massive demand and new restrictions on millions of Britons - not to mention an expected wave of redundancies ahead - there is a lot standing in the way of further strength for retailers.

August proved a far better month than most retailers expected, with many market towns and retail parks benefitting from increased footfall as consumers holidayed at home and fears around Covid-19 eased for a short while. However, there remains huge uncertainty for shops, particularly those in city centres.

With the autumn/winter season set to be characterised by uncertainty and increased social restrictions, we can expect to see further changes across the sector as businesses look to reshape their models for a Covid Christmas'. Naturally, there is growing anxiety among those who bank on a successful golden quarter given the impact social distancing could have on this year's festivities.

There is considerable uncertainty as to just how willing and able consumers will be to spend beyond the third quarter. Indeed, persistent consumer caution is seen as a significant risk that could limit the UK recovery.

The fundamentals for consumers have taken a clear downturn as a result of COVID-19, and they are likely to remain under pressure in the near term at least. Many people have already lost their jobs despite the supportive government measures - as was highlighted by employment falling by 695,000 over April-August [...] - while others will be concerned that they may still end up losing their job once the furlough scheme ends in October.

8.29am BST

As well as the home improvement sales that the ONS highlighted, clothing sales were also a big contributor to retail sales growth.

Clothes sales rose by 13.5%, a sign that discretionary spending continued to recover", said Andrew Wishart, a UK economist at Capital Economics, a consultancy.

Having already exceeded their pre-virus level in July, the further rise in retail sales in August shows the striking rebound of consumer spending after the crisis. That chimes with the Bank of England's payments data which, as we learnt in the September minutes yesterday, suggests that overall consumer spending may have already made a full recovery.

The strength of retail sales is particularly striking in a month when non-retail spending, particularly on restaurant meals due to the eat out to help out scheme, also picked up.

But spending may yet stutter as the furlough scheme is wound down and unemployment rises, weighing on household incomes and job security. And other parts of the economy, such as investment, are taking much longer to recover. That's why we think it won't be until around the start of 2022 that GDP recovers to its pre-virus level. And with virus case numbers accelerating, the risk is it takes longer.

8.21am BST

Some more details on the UK's retail sales increase: it appears that the online sales surge since lockdowns redirected spending away from bricks and mortar shops has slightly abated - but it still looks like it could have a lasting effect.

The ONS said:

Online retail sales fell by 2.5% in August when compared with July, but the strong growth experienced over the pandemic has meant that sales were still 46.8% higher than February's pre-pandemic levels.

8.11am BST

It's looking like a fairly dreary start on stock market indices across Europe.

The FTSE 100's declines have been led by industrials such as GKN owner Melrose, jet engine maker Rolls-Royce and weapons maker BAE Systems. Gold and silver miner Polymetal was the worst performer after its biggest shareholder sold its stake.

7.56am BST

Good morning, and welcome to our live coverage of business, economics and global financial markets.

UK retail sales grew for the fourth consecutive month since April's lockdown in August, but the pace of growth slowed markedly.

#UK #retail sales volumes up a healthy 0.8% month-on-month in August; 4th successive gain. Up 2.8% year-on-year & now 4.0% above February level before lockdown impacted. Consumer spending has clearly played leading role in #economy's sharp bounce back in third quarter

In August, there was a mixed picture within the different store types as non-store retailing volumes were 38.9% above February, while clothing stores were still 15.9% below February's pre-pandemic levels.

Retail sales increased by an estimated 0.8% in August.

This is the fourth consecutive month of growth, resulting in an increase of 4.0% when compared with February's pre-pandemic level https://t.co/g2OkmiGl3y pic.twitter.com/AbHe2DfdKg

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