A new variant of Covid-19, dubbed “Omicron”, is affecting some countries around the world, and it could lead to further restrictions in the coming months. The variant comes as supply chain issues caused by the pandemic continue to affect businesses and households.
The UK’s latest GDP figures suggest the economy is lagging behind other G7 nations. The UK’s economy is still 2.1% below its pre-pandemic level in the final quarter of 2019 after growth slowed to 1.3% between July and September 2021. In contrast, France is just 0.1% below pre-pandemic output, while the US economy is already larger than it was pre-pandemic.
Despite suggestions that the Bank of England (BoE) would increase its base interest rate to combat inflation, the Monetary Policy Committee voted to leave it unchanged at a record low of 0.1%. The BoE also said it expects inflation to peak at around 5% next April. If inflation reached this level, it would be the highest rate in a decade and is more than double the BoE’s 2% target.
High rates of inflation could affect both households and businesses. According to the Institute for Fiscal Studies, the average worker would need a pay rise of over 7% just to maintain their standard of living. So, it’s not surprising that a YouGov poll found that UK consumers are feeling less optimised and worried about their finances.
Energy is one of the household expenses that has surged in price. In November, another five energy firms collapsed, including Bulb, which has 1.7 million customers, amid rising fuel prices. Since the start of August, more than 20 energy suppliers have failed.
Supply chain challenges may be part of the reason why the UK is falling behind other economies. The IHS Markit PMI (Purchasing Managers Index) shows the manufacturing industry is growing but struggles with supplies and staff shortages are hampering potential growth.
Data from the CBI also demonstrates the effect shortages are having on prices. New factory orders reached a high not seen since at least 1977, but price expectations have also climbed to a 44-year-high to offset some of the challenges factories are facing.
Staff shortages could be good news for jobseekers. According to the Recruitment and Employment Confederation, active job postings in the first week of November reached a record high of 2.86 million.
In other news, Royal Dutch Shell is planning to shift its tax residency from the Netherlands to the UK as part of a shakeup. The company has said the move will help strengthen its competitiveness. It will also drop “Royal Dutch” from its name. The decision follows a landmark ruling earlier this year in the Netherlands that said Shell must cut its 2019 CO2 emissions by 45% by 2030.
The European Central Bank’s (ECB) chief economist Philip Lane commented that tightening monetary policy now to temper inflation would be counterproductive. Inflation reached 4.1% in October, more than double the ECB’s target. Rising inflation means prices are rising. In Germany, factory-gate prices increased by 18.4% in the year to October, the largest rise since 1951.
According to the European Commission, inflation is also affecting consumer confidence. The rising number of Covid-19 cases is also likely to be having an effect, with Austria entering full lockdown and Germany reintroducing emergency measures to control the spread of the virus.
Dutch container shipping group Maersk commented that there was no end in sight to the supply chain crisis. Despite disruptions, the group posted record quarterly revenues as freight rates increased sharply.
Much like the UK, the US continues to struggle with supply chains issues and inflation.
The IHS Markit PMI fell from 60.7 in September to 58.4 in October. While still growing, the pace is slowing as factories struggle to meet the demand for new orders.
Inflation has also reached a 30-year-high of 6.2%. This has led to the US Federal Reserve starting to taper the stimulus programme that aimed to support the economy during the pandemic. As well as affecting businesses, inflation has dampened consumer confidence. The University of Michigan’s Consumer Sentiment Index fell to its lowest level since 2011.
Figures show that October was a good month for jobseekers. The US added 531,000 jobs in October and revised the figures for August and September upwards. Since the record losses in April 2020 caused by Covid-19 restrictions, the US has added 18 million jobs. However, the total number of new jobs is still more than 4 million short of pre-pandemic levels.
US pharmaceutical giant Pfizer has lifted its full-year sales forecast as Covid-19 vaccine sales rise again. The company reported sales of $24.1 billion (£18.1 million) between July and September, a 130% increase year-on-year.