In economic terms the lead headline this week was the Governor of the Bank of England, Andrew Bailey’s revised economic outlook and his backing the decision to end the nine million furloughed jobs in October. He went on to say that the pace of the recovery in recent months was ahead of where the Bank had expected it to be at this point, back in May. While this is positive news, the Bank has also kept the interest rate at 0.1%, as a stark reminder that the economy is to shrink this year by 9.5%. However, it also forecasts 9% growth next year returning the economy to its pre-Covid’ size and 3.5% growth in 2021. The FTSE100 faltered only slightly at the interest rate news while the pound strengthened against the dollar.
In the US handling of the pandemic continues to be a concern. If it translates to lower US economic performance the value of the dollar could slide however the US economy remains one of the strongest in the world. Its preeminent status among world currencies seems highly unlikely to change despite the somewhat sensationalist suggestion that it could.
UK growth forecasts continue to reflect the expectation that the economy will be “back to normal” by the end of next year. This assumes that there will be no second Covid’ wave. Outbreaks are contained by localised restrictions and there is no appetite in government for a return to national lockdown as long as this continues, however we’re not out of this yet. There is no vaccine or fast, widely available testing as yet. People returning from listed countries are still advised to quarantine on returning to the UK rather than being tested.
Next week (in Scotland) it will be interesting to see how the return of children to schools (possibly the largest provider of UK childcare for working parents) affects the economy and the virus spread. An uneventful return would certainly be a big step forward and help ensure the rest of the UK schools return. Apart from anything else, it’s also a return to normality and will boost public confidence.
On another positive note, this is Eat Out to Help Out month. Lunchtime in Glasgow city centre was busy Monday to Wednesday (when the scheme operates) with queues outside restaurants despite the rain and there was no apparent easing of demand yesterday in the absence of a Thursday subsidy. Mr Sunak seems to be pretty smart in selecting the days his offers applies.
In comparison to economic forecasting, the weather appears to have a more widely accepted model and the consensus is that it’s going to be hot this weekend! I hope you get a chance to enjoy it.
Regards
Kenny