After the global economy suffered due to the pandemic and related restrictions, the World Bank now predicts that it will grow at the fastest rate recorded in 80 years. The organisation expects the global economy to grow by 5.6% in 2021. However, it also warned that poor nations are at risk of falling further behind wealthy countries amid slower vaccine progress.
The date when all Covid-19 restrictions would lift in the UK, dubbed “freedom day”, was pushed back amid rising cases. However, things are slowly beginning to return to normal and the signs are positive.
A YouGov poll found that consumer confidence has reached a five-year high as people are more upbeat about both their personal finances and life after the pandemic.
Improved employment prospects are likely to be playing a role in the outlook. The UK jobless rate dropped to 4.7% in February–April. The number of workers on furlough has also fallen significantly. In May there were 880,000 workers on furlough; this compares to 4,319,100 just a few months earlier in March and coincides with food and entertainment sectors reopening.
IHS Markit data shows strong growth across all areas too. Any PMI (Purchasing Managers Index) reading above 50 indicates growth:
- The manufacturing PMI in May was the highest since the survey began in 1992 at 65.6, as both output and new orders grew.
- The service sector also hit a 24-year high in terms of growth. The PMI was 62.9, implying the economy is growing quickly after contracting at the beginning of the year.
- The construction sector recorded its fastest growth in almost seven years and saw its biggest jump in new orders since at least April 1997. The PMI reading was 64.2.
While many sectors and businesses are posting signs of recovery, the travel industry continues to face challenges. Changes to travel restrictions have made it difficult for travel firms to effectively plan. For example, when the government removed Portugal from the green list, tour groups and airlines lost more than £2 billion in value.
Some travel firms could also face investigations and fines over how they handled refunds during the pandemic. The Competition and Markets Authority (CMA) is investigating whether British Airways and Ryanair broke consumer laws by not giving refunds for flights that could not be legally taken.
Another area that’s received attention in the press is soaring property prices. According to Nationwide Building Society, house prices increased 10.9% in May year-on-year. Sir Dave Ramsden, deputy governor at the Bank of England, said the bank was monitoring the housing market carefully. He added they were weighing up the possibility that a rapid recovery from the pandemic could lead to a sustained period of inflation.
The pandemic has meant the trade implications of Brexit have been difficult to measure. However, figures from the Office for National Statistics show that leaving the EU has continued to affect trade with countries in the bloc, as exports remain well below pre-Brexit levels.
On the topic of trade, the UK has now begun the process of joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). If successful, it will give the UK entry to the regional free trade agreement and could be important for boosting trade following Brexit. CPTPP signatories include Australia, Canada, Japan, and New Zealand.
The UK has also signed a new trade deal with Norway, Iceland, and Liechtenstein, which aims to boost the digital sectors and slash tariffs on high-quality food and farm products.
After falling into a double-dip recession at the beginning of the year, there’s also positive data from the eurozone. In June, business growth hit a 15-year high as sectors reopened and the vaccine programme continued to roll out. The overall PMI for June was 59.2, up from 57.1 in May.
Eurozone firms also reported that new orders accelerated at their fastest pace since June 2006, boosting hopes of a sustained recovery.