UK economy at the crossroads before lockdown ends

The number of daily new confirmed coronavirus infections has fallen in the past month but remains higher than in the first wave of the pandemic. As the government plots a course to relaxing Covid restrictions in four stages this spring, the seven-day average for the number of deaths within 28 days of a positive Covid-19 test has fallen to 400, from almost 1,300 in early January.

After the government hit its target to offer the vaccine to the four most at risk groups in the UK, almost 18 million people have had a first jab. Almost 650,000 have had a second.

Mobility climbs despite continued lockdown

The number of trips taken on UK roads and public transport has increased slightly in the past month, in a sign that more people are starting to leave their homes despite the continued lockdown. According to Apple mobility data – which records requests made to Apple Maps for directions – bus and train journeys are still down by more than half from pre-pandemic levels but have crept up in recent weeks.

Mobility levels are higher than during the first lockdown, reflecting a lesser impact on economic activity.

Stock market gains after unlocking roadmap

Shares in the British companies most likely to benefit from the easing of Covid restrictions have rallied on the London stock market after Boris Johnson set out the government’s roadmap for ending lockdown in England. However, concerns are growing that a faster economic recovery would trigger a surge in inflation, which could force central banks to raise interest rates.

It comes at a time when several global markets, including the Dow Jones and the Japanese Nikkei, are close to record highs. The FTSE 100 has risen by about 150 points since the start of the month, to trade at about 6,600. The index of leading UK company shares still remains about 1,000 points below its pre-pandemic level in early 2020.

Inflation edges higher as food prices rise

Rising food prices drove up inflation in January. The consumer prices index (CPI) rose to 0.7% from 0.6% a month earlier as food and household goods stores put up their prices, and offered fewer discounts this year on items such as beds and settees.

The Office for National Statistics (ONS) noted price rises on frozen fish fingers, vegetables such as cauliflowers, and premium crisps. Analysts said the inflation rate would probably rise further over the coming months as the economy gradually reopens.

Business activity stronger than feared in February

Britain’s economy showed signs of steadying in February after the plunge in business activity in January when lockdown measures were reintroduced. Closely watched surveys of company managers showed the situation improved for services firms but the economy still remained in contraction as restrictions took their toll.

The flash IHS Markit/Cips purchasing managers index jumped to 49.8 from 41.2 in January, just below the 50 mark that divides expansion from contraction. With rising Covid infections on the continent, activity in the eurozone remained subdued. However, activity hit a six-year high in the US. Although losing some momentum, China’s economic recovery continued.

Source: The Guardian