Official statistics show the UK headline
rate of inflation now stands at a 10-year
high, with surveys pointing to further
upward pressure as firms continue to
report rapidly-rising cost burdens.
Data released last month by the
Office for National Statistics (ONS)
revealed that the Consumer Prices Index
(CPI) 12-month rate – which compares
prices in the current month with the
same period a year earlier – rose to 4.2%
in October. This was above all predictions
in a Reuters poll of economists and
represents a considerable jump from
September’s rate of 3.1%.
The rise was largely driven by higher
household energy bills following the
lifting of the regulatory price cap on 1
October, with gas prices paid by consumers
up 28.1% and electricity up 18.8%
in the year to October. ONS said price
rises were evident across the board with
the cost of petrol, second-hand cars, furniture
and household goods, hotel stays
and eating out all increasing noticeably.
Some of the current increase in the
rate of inflation is inevitably due to weak
price levels witnessed in October last
year when the pandemic was dragging
down economic activity. Analysts do
expect to see inflation ease somewhat
next year as these factors begin to drop
out of the data.
Survey evidence, though, suggests
there are further inflationary pressures
in the pipeline. Preliminary data from
November’s IHS Markit/CIPS Composite
Purchasing Managers’ Index, for
instance, revealed record cost pressures,
with input price inflation ‘rising at
the fastest rate since the index began
in 1998’, fuelled by ‘higher wages and a
spike in prices paid for fuel, energy and
raw materials.’
November’s Monthly Industrial Trends
Survey published by the Confederation
of British Industry (CBI) also highlighted
the current inflationary pressures; output
price expectations among manufacturers
climbed to the highest level since
May 1977.SFFS Economic Review_Nov 21

The Office for National Statistics (ONS)
has revised UK economic growth for Q2
2021 to 5.5% from an original estimate
of 4.8%. The UK’s level of GDP is now
3.3% below where it was pre-pandemic
in Q4 2019, revised from the previous
estimate of 4.4% below.
Other ONS data indicates a loss
of momentum more recently, with
the economy growing by 0.1% in July.
Although this represents a sixth successive
month of growth, the figure was
lower than June’s 1.4% rise and below
the 0.6% average forecast predicted in a
Reuters poll of economists.
July’s slowdown partly reflects an
upsurge in COVID cases and the resulting
‘pingdemic’, with ONS saying some
businesses complained of staff being
unable to attend work due to self-isolation
requirements. Additionally, analysts
said the slowdown highlighted the
impact of supply chain disruptions.
More recent survey data also shows
supply chain issues continue to weigh on
the recovery. The closely watched IHS
Markit/CIPS flash composite Purchasing
Managers’ Index (PMI), for instance, fell
from 54.8 in August to 54.1 in September.
While any reading above 50 does
still imply growth, this was a fourth
consecutive monthly decline, signalling
a loss of momentum across the UK
private sector.
IHS Markit’s Chief Business Economist
Chris Williamson said, “The survey also
points to business activity being increasingly
constrained by shortages of materials
and labour, most notably in the manufacturing
sector but also in some services
firms. A lack of staff and components
were especially widely cited as causing
falls in output within the food, drink and
vehicle manufacturing sectors.”

SFFS Economic Review_Sep 21

SFFS Economic Review_Aug 21

The latest gross domestic product
(GDP) figures showed that the UK
economy grew strongly in the second
quarter, although more recent survey
evidence does suggest the recovery is
losing momentum.
Data published by the Office for
National Statistics (ONS) revealed the
economy grew by 4.8% in the second
quarter of this year, fuelled by expansion
in the retail, restaurant and hotel sectors.
Despite this growth, the economy
remains 2.2% smaller than it was immediately
before the pandemic struck,
although analysts do expect it to return
to pre-COVID levels later this year.
Commenting on the figures, Chancellor
Rishi Sunak said, “The economy
is recovering very strongly, exceeding
many people’s expectations. But I’m not
complacent. The economy and our public
finances have experienced a significant
shock. It is going to take us time to
fully recover from that.”
GDP growth in the month of June
alone was estimated to be 1%, slightly
higher than the consensus forecast in a
Reuters poll of economists. More recent
survey evidence, however, suggests
growth may have slowed over the past
couple of months.
The closely watched IHS Markit/CIPS
flash composite Purchasing Managers’
Index, for instance, fell to 55.3 in August
from 59.2 in July. While any value above
50 does still represent growth, this was
the survey’s lowest reading since February,
with respondents widely reporting
constraints on business activity due to
staff shortages and supply chain issues
across both the manufacturing and
service sectors.
Data from two Confederation of
British Industry surveys also suggest
the recovery may be losing momentum.
The latest Industrial Trends Survey
found manufacturing output growth in
the three months to August eased from
the previous month’s record level, amid
the worst stock shortages on record,
while the Service Sector Survey showed
optimism among firms was ‘mixed’ in the
three months to August.