So what is going on in the UK economy right now?

With queues at the petrol pumps, the furlough scheme finishing and fears for energy companies, the media headline writers are having a field day around Britain heading for a “winter of discontent”.

So, as per our usual philosophy, where nothing is ever as bad or as good it seems to be, we thought it would be appropriate to look at some hard data and statistics, and try to tell a story around how the UK economy is doing right now.

1) Online job advertisements are 133% of the February 2020 average

The chart below shows interesting comparisons from 2021, 2020 – which we should largely ignore – and 2019. Comparing the 2021 black line to 2019 in green is probably the most useful.

We can see a pick-up in virtually all sectors as the economy re-opens but the transport/ logistics/ warehouse sector is the most fascinating jump, which is borne out with the anecdotes about lack of lorry drivers.

Conclusion: On average there are more jobs available, but they tend to be in very specific sectors.

2) UK Services PMI (Purchasing Managers Index) shows UK still expanding, but not as fast as it was.

This index is seen as a good predictor of activity in the UK economy as it is based on a survey of businesses asking around what they are currently seeing.

The index is hard to read, but the latest figure at 54.60 is less than the 62.9 from May, but any score above 50 is still seen as expanding. See One Year Chart below.

When looking over a five year period for context, this reading averages somewhere in the low-50s for the last few years.

One year chart

Five year chart

Conclusion: The UK economy is still in rebound mode from the lockdowns and expanding, thought not quite as fast as it was.

3) The UK Household Savings rate is very strong.

This figure estimates the amount of money households have available to save as a percentage of their income. The recession in 2020 was the first since records began where savings rates actually went up. Even after they dropped down from the initial lockdown, rates have continued to rise from there.

Conclusion: The average UK consumer is in rude health and has significant spending capacity to unleash if they want.

4) The number of employed persons in the UK is rebounding but still below pre-Covid peak.

We find this measure more interesting than the unemployment rate, which is more likely to be skewed by furlough and people leaving the job market.

The index on the right is in 1000s, meaning there are 600,000 less people employed today than there were at the start of 2020.

Conclusion: This certainly has a delayed effect, but shows there is capacity in the economy to employ more people who want to work.

5) Consumer Price Inflation moving higher with recent uptick.

This chart, more than any of the others, has the most interest for us going forwards. Will the deflationary forces of the last 40 years continue? Or are we in a new world with global supply chains being disrupted, offshoring for cheapness stopped and increasing wages as a social bargain by corporates? Central Banks still think the former, however time will tell.

Conclusion: Inflation is happening now – it just depends if it will continue.

The summary on the charts above tell a very interesting story. The UK economy is expanding, though not quite as fast as it was, but also has plenty of jobs available in certain sectors. The average UK consumer has increased their savings significantly which puts them in a good position, but they may need these savings, as prices look to be going up.

Key learning: Ignore the media noise and look to the data for the real story.

Adam Walkom
Permanent Wealth Partners
Phone 020 3928 0950