Closing summary

Global stocks are having a bit of a wobble today, with the exception of the UK’s FTSE 100 index, which is 0.3% ahead, as investors fret about rising Covid cases and China’s regulatory crackdown. On Wall Street, stocks have retreated from the record highs hit in recent days.

The miner BHP is the biggest riser on the FTSE, up 5.6%, after it unveiled a major overhaul, including dumping its oil and gas assets, and bumper profits. It will also will bring together its Australian and UK arms into one company and leave the London Stock Exchange.

US retail sales fell 1.1% in July, more than expected, with car sales down nearly 4%, the third consecutive month of declines. But US industrial production was stronger than expected, up 0.9%, while manufacturing jumped 1.4%, taking output above February 2020 levels.

UK unemployment fell in June as workers made redundant during the pandemic appeared to respond to a rise in vacancies to a record high to re-enter the labour market and secure a job. Wage growth soared to 8.8%, raising concerns that this could put upward pressure on inflation and prompt the Bank of England to raise interest rates earlier than expected.

After the strong UK job market data, JPMorgan Chase economist Allan Monks brought forward his forecast for the first interest rate hike from the Bank of England. He is now expecting the first move in next year’s April to June quarter, six months earlier than previously.

Rishi Sunak came under further pressure to suspend the state pension triple lock after the wage figures showed that the chancellor is on course to pay pensioners a rise of more than 8% next year, reports our economics writer Phillip Inman.

Sunak is understood to be considering telling Britain’s 12m state pension claimants that the pandemic has artificially inflated the official wages figures and a new formula is needed to calculate the rise in next years basic state pension.

The decade-old triple lock is underpinned by a promise to pay either 2.5%, the rate of inflation or the level of earnings recorded in the July employment figures.

Our other main stories today:

Ocado has reported its first ever sales decline as the grocery home shopping boom triggered by the pandemic dissipates.

BT has appointed Adam Crozier, the former chief executive of Royal Mail and ITV, as its new chairman.

The UK government is coming under growing criticism for taking a “weak” stance on overseas takeovers of UK businesses, amid the sale of two London-listed defence contractors to US-backed buyers worth almost £9bn.

About 3 million households in the UK could begin using low-carbon hydrogen to heat their homes and cook rather than fossil fuel gas under government proposals to attract at least £4bn of investment to the hydrogen economy by 2030.

Thank you for reading. We’ll be back tomorrow. Good-bye! -JK

Updated

US manufacturing rises above pre-pandemic level

The 1.4% rebound in US manufacturing output in July was also stronger than expected and means that output is finally back above its February 2020 level.

Andrew Hunter, senior US economist at Capital Economics, says:

But with many sectors still suffering from severe shortages of raw materials and workers, we suspect growth will slow again over the coming months.

The rise isn’t as strong as it looks as it was partly driven by an 11.2% m/m surge in motor vehicle production, which appears to mainly reflect a seasonal distortion.

Because a number of auto plants have been idled in recent months due to the ongoing global semiconductor shortage, there were fewer than usual annual shutdowns for retooling, generating an apparent jump in production after seasonal adjustment. With the semiconductor shortage unlikely to clear for some time, that boost will probably be reversed in August.

Admittedly, there were also solid gains in a number of other sectors in July, with machinery output up 1.9%, computers & electronics up 1.1%, electrical equipment rising by 2.3% and aircraft production up by 1.9%.

Wall Street has opened lower after the bigger-than-expected decline in July retail sales. The Dow Jones lost 125 points, or 0.35%, to 35,500, the S&P 500 fell 18 points, or 0.4%, to 4,462 while the Nasdaq shed 123 points, or 0.8%, to 14,670 at the opening bell.

However, US industrial production has come in stronger than expected: up 0.9% in July, the biggest gain since March. Analysts had expected a 0.5% increase.

UK regulator approves Moderna Covid jab for 12 to 17-year-olds

Britain’s health regulator has approved Moderna’s Covid-19 vaccine for use in children aged 12 to 17 years, a few weeks after the Pfizer/BioNTech shot was given the green light.

The Medicines and Healthcare products Regulatory Agency confirmed that the vaccine, known as Spikevax, is safe and effective in this age group. While most children only develop mild or no symptoms if they get Covid-19, they are still able to spread the virus and some are at risk of becoming seriously ill.

The shot was recommended for use in adolescents by European regulators in July and is still awaiting authorisation in the US.

Britain’s Joint Committee on Vaccination and Immunisation gave the go-ahead on 4 August for 16- and 17-year-olds to be vaccinated with the Pfizer/BioNTech jab ahead of the reopening of schools in September.

James Knightley, chief international economist at ING, is less pessimistic.

US retail sales fell sharply in July, but it isn’t necessarily a disaster. The resurgence in Covid and anxiety over inflation’s impact on spending power has certainly hurt sentiment, but the re-opening, a rebalancing of priorities from goods to services and rising household incomes still means broader spending can continue to grow.

With the economy re-opening there are a greater number of options on which to spend money. We will increasingly see a rebalancing of consumers’ total spend away from “things” that are picked up in retail sales, towards “experiences”, such as travel, entertainment and leisure, which are not.

US retail sales
US retail sales Photograph: ING

While we suspect retail sales will underperform wider spending patterns, both goods and services can continue to grow. Consumer finances remain in good shape with incomes picking up thanks to rising employment and wages. Meanwhile, the Federal Reserve flow of funds data showed households have seen their wealth surge $20tn since the end of 2019 with $3tn of that increase in liquid cash, checking and time savings deposits.

Admittedly, last Friday’s plunge in consumer sentiment is a worry, likely reflecting the Covid resurgence and anxiety over surging inflation’s impact on household spending power. So far, evidence of a moderation in high frequency tracking data, restaurant bookings and air travel is only tentative at this stage. Nonetheless, it is something we will need to keep an eye on and already presents downside risks for August activity readings.

Updated

However, Andrew Hunter, senior US economist at Capital Economics, says the 1.1% drop in July retail sales could be a sign that “the rapid spread of the Delta coronavirus variant is convincing some consumers to stay away from public spaces again and is consistent with real consumption growth slowing sharply in the third quarter”.

Headline sales were hit by a further fall of 3.9% m/m in auto sales, with the fall in real spending likely to have been at least as large given that new vehicle prices rose by a strong 1.7% last month. That was partly offset by a price-related 2.4% rise in gasoline sales. But there were also declines in spending on home furnishings (which fell by 0.6%), groceries (-0.7%), sporting goods (-1.9%) and clothing (-2.6%). Overall control group sales fell by 1.0% m/m. That could all be a sign that surging virus cases are convincing consumers to stay at home again, although that is a little hard to square with the continued recovery in spending at bars & restaurants, which rose by 1.7%, and the 3.1% fall in online sales.

Either way, recent data suggest that the spread of the Delta variant has driven a renewed plunge in consumer confidence in early August, suggesting that retail spending will remain under pressure. Moreover, that comes at a time when consumption was already likely to be weighed down by the withdrawal of fiscal support and surging prices eroding purchasing power.

The upshot is that, after jumping by 11.8% annualised in the second quarter thanks to the stimulus-cheque boost to goods spending, real consumption growth will be much weaker in the third quarter, and potentially even lower than the 3% annualised gain we had pencilled in.

US Retail Sales fell 1.1% in July, more than the 0.3% decline expected. pic.twitter.com/mLEHyOi3jG

— jeroen blokland (@jsblokland) August 17, 2021

Consumer spending makes up more than two-thirds of US economic activity, and grew at double-digit rates in the second quarter, helping to push the level of GDP above its peak in late 2019. But retail sales only make up a portion of consumer spending. Economists at Bank of America noted:

Keep in mind that retail sales do not capture the majority of services spending and therefore understate the resilience of overall consumer spending.

Households have accumulated at least $2.5 trillion extra savings during the pandemic when they were unable to dine out or go on holiday, so consumer spending is expected to remain strong for the rest of the year.

Updated

Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Caroline, told Reuters:

Even as demand remains strong, motor vehicle sales have continued to fall over the past few months as the semiconductor shortages have made it difficult for consumers to find vehicles they want regardless of the price.

The chip shortage has also affected the availability of some common household appliances like microwaves and fridges.

Excluding cars, gasoline, building materials and food services, ‘core’ retail sales fell 1% last month after an upwardly revised 1.4% increase in June.

US retail sales drop on weak autos

US retail sales fell more than expected in July as semiconductor shortages held back purchases of cars and other goods.

Retail sales dropped 1.1% last month, according to the US Commerce Department, with auto sales down 3.9%. Online sales tumbled, after Amazon brought forward its prime day to June from July. Retail sales in June were revised up a tad to show growth of 0.7% rather than 0.6%.

Updated

Travel stocks hit by Delta variant fears

Travel stocks have been hit by rising fears over the fast-spreading Delta variant, with New Zealand saying it would return to lockdown after its first Covid case in eight months.

Hotel groups are leading the losses on the FTSE 100, with Premier Inn owner Whitbread losing 3% and InterContinental Hotels shedding 2.2%. Britain Airways owner IAG lost 2.5% while travel operator Tui tumbled 4%.

US stock futures are pointing to a lower open on Wall Street later, with declines of 0.4% to 0.6% forecast for the Nasdaq, S&P 500 and Dow Jones.

The FTSE 100 index in London has turned positive, trading 12 points, or 0.18%, higher at 7,166 while other markets in Europe are still in the red. The Dax in Frankfurt has slipped 0.15%, the CAC in Paris has lost 0.5% and the FTSE MiB in Milan has shed 0.8%.

BHP shares rallied 7.4% today, making them the biggest riser on the FTSE 100, after the mining giant unveiled a 42% rise in profits and announced a major overhaul.

It is simplifying its company structure and will dump its oil and gas assets into Woodside Petroleum, creating one of the biggest energy producers in the world.

BHP on Tuesday declared a bumper profit due to high iron ore prices, as it announced it will bring together its Australian and UK arms into one company and leave the London Stock Exchange, which could have ramifications for investors.

Updated

Rory Fennessy, an economist at Oxford Economics, has looked at the eurozone GDP figures, which confirmed that the bloc expanded by 2% quarter-on-quarter between April and June, putting to an end two consecutive declines in activity and “putting the bloc on course for a solid recovery over 2021”. He says:

  • The economy is now hovering 3% below its pre-crisis level, which we expect to be surpassed by the end of the year as national economies continue their recoveries despite concerns presented by the Delta variant.
  • The eurozone’s flash employment estimate for Q2 saw total employment rise by 0.5% over the quarter as the labour market recovery continues. Elevated employment expectations among firms bode well for employment growth for the rest of 2021, but withdrawals of furlough schemes and pandemic developments present downside risks.
  • Quarterly growth was by far the strongest in Portugal at 4.9%, driven by strong domestic demand, particularly consumption activity. Strong expansions were reported in two of the bloc’s major economies, Spain and Italy, of 2.8% and 2.7% respectively.
  • Germany’s quarterly growth of 1.5% fell below the bloc-wide figure, but upwards national accounts revisions means that the level of German GDP is closely in line with our projections. French GDP growth of 0.9% was the lowest among the big four economies, but prospects for Q3 look much brighter for the French economy after half of Q2 was spent in lockdown.

Updated

Tony Russell, chief growth officer at the work management automation firm Proteus has looked at the productivity figures:

It’s clear that early fears of the pandemic crippling the UK’s productivity were unfounded; in fact, the silver lining of the crisis might be that it has gone some way to solving the productivity puzzle. Most industries have increased output per hour when compared to pre-pandemic levels. The second quarter did reveal a dip in productivity, likely due to furloughed workers returning to work as they are disproportionately employed in less productive industries.

But the real leadership challenge for businesses will be seen in the third quarter, as the unlockdown brings the issue of hybrid working to the fore. Management has changed forever, and the traditional business process is no longer fit for purpose.

Productivity cannot be measured in the same way with a divided workforce. It is critical that those who choose to work from home are not overlooked, as they are more susceptible to overtime and burnout. Poor management in the newly hybrid world will have a negative impact on productivity in the long run. To avoid this, businesses must strengthen their leadership and increase their innovation through data insight and training – else they risk falling behind, which will quickly show up in their bottom lines.

UK #productivity would be below pre-pandemic levels in 2020 and 2021 if not for a positive "allocation effect" (industry mix effect).
Within-industry productivity growth (ignoring the compositional effect) was down through most of 2020 and 2021; although some industries are up. pic.twitter.com/Xi3ycM7z0c

— Josh Martin (@JoshMartin_ONS) August 17, 2021

Productivity in the UK economy has risen above pre-pandemic levels, according to figures from the Office for National Statistics released today.

In the April to June quarter, when the government eased coronavirus restrictions, output per hour worked was 0.6% above the 2019 average, despite being down 0.5% from the previous quarter.

However, despite the rise, output per worker was 2.7% below pre-pandemic levels, reflecting the impact of the government’s furlough scheme, the ONS said.

Updated

And Guardian columnist Gaby Hinsliff has looked at the rise of Next, Britain’s biggest clothing retailer: How a middle-of-the-road high-street chain became a retail powerhouse.

Too hot to work: we’ve looked at the dire impact of extreme heat on outdoor US jobs.

In the next few decades, Americans who work outdoors could increasingly find that it is simply too hot to do their jobs without risking their health.

By 2050, nearly 60% of outdoor workers – such as construction workers, emergency responders and farmworkers – could experience at least one week of workdays when extreme heat makes it too dangerous for them to work. This is in a scenario where little to no action is taken to reduce emissions. Currently less than 10% of outdoor workers lose work days to extreme temperatures.

Updated

In Australia, the sporting goods retail chain Decathlon has been fined $1.5m after it sold inflatable pools and basketball hoops without the required warning labels in a “careless” breach of Australian consumer law.

France-based Decathlon’s Australian stores between 2016 and 2019 sold several models of basketball rings and pools that were missing safety labelling, consumer warnings or instructions required by the safety standards.

About 3 million households in the UK could begin using low-carbon hydrogen to heat their homes and cook rather than fossil fuel gas under government proposals to attract at least £4bn of investment to the hydrogen economy by 2030, writes our energy correspondent Jillian Ambrose.

The government has published its long-awaited plans for a UK-wide hydrogen economy, which it says could be worth £900m and create more than 9,000 high-quality jobs by the end of the decade, rising to £13bn and 100,000 new jobs by 2050.

The strategy document lays out its efforts to attract investment in 5 gigawatts of hydrogen production by 2030. It suggests hydrogen could cover 20-35% of the UK’s energy consumption by 2050, providing a clean alternative to oil and gas in energy-intensive industries, power and transport.

Shares in Just Eat Takeaway rose 3.5% after the online takeaway service revealed a 52% rise in revenues to €2.6bn in the first six months of the year.

The number of orders placed on its platform in the UK jumped by 76% to 135m, as London recorded triple-digit order growth. Households placed orders 3.2 times a month, on average, up from 2.5 times a month during the first half of 2020 as the Covid pandemic hit.

However, the company has spent heavily on promotions, and slumped to an adjusted loss of €71m in the UK, versus a €127m profit a year earlier. Overall, it posted a €190m loss, but was confident that it would return to profitability in due course. Just Eat added 90 new brands to its platform including Leon and Le Pain Quotidien.

Jitse Groen, the chief executive, said:

In the first six months of this year, Just Eat Takeaway.com continued to invest significantly, predominantly in the historically underinvested legacy Just Eat countries. Our consumer base, restaurant selection and order frequency have strongly increased, which will lead to improved profitability going forward.

The Just Eat mobile phone app.
The Just Eat mobile phone app. Photograph: Just Eat/PA

Updated

In other news, BT has appointed Adam Crozier, the former chief executive of Royal Mail and ITV, as its new chairman, writes our media business correspondent Mark Sweney.

Crozier, who is standing down as chairman of online retailer Asos, will join as BT’s chairman designate on 1 March and take over from incumbent Jan du Plessis on 1 December.

BT began the hunt for a new chairman in March after Du Plessis announced his resignation after reports of clashes with the chief executive, Philip Jansen, who reportedly threatened to resign unless a replacement was found.

Updated

Employment also improved in the eurozone in the second quarter, up 0.5% following a 0.2% drop in the first quarter.

Employment
Employment Photograph: Eurostat

Eurostat noted that this was faster than the 1.6% quarterly growth seen in the US in the April to June quarter, which came after 1.5% expansion in the first quarter. The annual rate in the US rose to 12.2% in the second quarter.

The annual growth rates were also stronger in the eurozone and EU, at 13.6% and 13.2% respectively.

However, the UK economy was even stronger in the second quarter, preliminary figures from the ONS showed last week. It expanded by 4.8% on the quarter (following a 1.6% decline between January and March), as the lockdown measures introduced to fight the pandemic were relaxed. GDP remained 4.4% below its pre-pandemic level, though.

Eurozone GDP growth in the second quarter
Eurozone GDP growth in the second quarter Photograph: Eurostat

Updated

Eurozone bounces back with 2% growth in Q2

Eurozone GDP is out.

The eurozone economy bounced back with 2% quarterly growth between April and June, following a 0.3% decline in the first quarter when countries were in Covid lockdowns.

The second estimate published by Eurostat, the statistical office of the European Union, confirmed an earlier reading. The data also showed that the EU expanded by 1.9%, after a 0.1% contraction in the first three months of they year.

Eurozone Q2 Prelim GDP, Employment Report – Eurostat
European Statistics Agencyhttps://t.co/FPNYZlqBYw pic.twitter.com/u9FvKLn9fT

— LiveSquawk (@LiveSquawk) August 17, 2021

Updated

Rishi Sunak is too savvy an operator to declare victory in the battle against unemployment because the past 18 months have shown that the unexpected can happen, and often does, writes our economics editor Larry Elliott.

Yet while noting that there could still be “bumps in the road”, the chancellor is certainly relieved by how well the UK labour market has recovered from the effects of the Covid pandemic.

The latest jobs bulletin from the Office for National Statistics showed the employment rate up and the unemployment rate down. Job vacancies hit 1m for the first time in July and the number of hours worked per week – while still below their pre-crisis levels – passed 1bn for the first time since early 2020. Without question, this was an extremely strong report.

Here’s our analysis of today’s UK job market data:

Others are less upbeat about the job market recovery. The Liberal Democrats’ Treasury spokesperson, Christine Jardine, says:

These figures don’t give us a real picture of what is going on in our economy or the scale of the challenge ahead. The government needs to listen to the businesses in the hospitality sector who cannot open up fully because staff were forced to move on during the lockdown. Or the countless small businesses who say they’re months away from closing. And the parents worried how they will feed their children and pay their bills if they lose their job when furlough ends next month.

What the country needs is a long-term strategy to support jobs and businesses into the winter. And the chancellor must start by extending the furlough scheme into next year to avoid a devastating jobs cliff-edge next month.

Rising pay is obviously good news for households who have been hit hard by the pandemic.

Kevin Brown, savings specialist at Scottish Friendly, says:

The post-pandemic jobs recovery continues to roll on and it now seems less likely that we will see significant redundancies being made from September onwards once the furlough scheme comes to end.

Although there are fewer people in work than before Covid-19 struck in early 2020, job vacancies are at a record high and average weekly pay growth is rising faster than anticipated.

This is good news for households who may soon begin to notice a significant rise in the cost of living if inflation continues to tick upwards, potentially reaching 4% or 5%.

However, workers enjoying higher pay could help to feed inflation in the coming months and that is likely to make the Bank of England nervous. If both continue in tandem, we could see the decision to raise interest rates made sooner rather than later.

Economists say first UK rate hike could come ' a bit sooner'

Higher pay growth is likely to put upward pressure on inflation, and this could prompt the Bank of England to raise interest rates sooner than expected, some economists say.

The June figure of 8.8% was higher than the 8.5% pay growth the Bank of England was expecting. But several economists believe that labour shortages and pay rises will wane in a few months’ time, especially as the government’s furlough scheme will begin to be wound down at the end of September.

Even so, Ruth Gregory, senior UK economist at Capital Economics, says that “the risks are tilted towards wage growth coming in a bit higher and the monetary policy committee raising rates a bit sooner than we anticipate”.

Kallum Pickering, senior economist at Berenberg, says:

The ONS notes the upward impact on wage growth estimates coming from compositional and base effects. The ONS calculates that in June – after stripping away such effects – wage growth excluding bonuses fell in the 3.5-4.9% year-on-year range.

While this is significantly lower than the 7.4% headline number, it remains well above the mere 2.0% average rate from 2009-2019 and likely above the pre-Lehman average of 3.9% (2002-2007).

We continue to look for the first rate hike in August 2022. But the strengthening inflation dynamic and strong recovery in domestic demand suggest the risks are tilted towards a hike even sooner than that – perhaps as early as May 2022.

Updated

In the care home sector, employers are also offering signing-on fees of up to £10,000 to tempt applicants, after Brexit caused staff shortages as a number of EU citizens returned home. This has been worsened by the “pingdemic” – a huge number of healthy workers self-isolating after being “pinged” by NHS test and trace.

Care home operator HC One is offering a £10,000 “welcome bonus” on two jobs for registered night nurses, both in Scotland, my colleague Sarah Butler spotted recently. The mental health group Elysium Healthcare is offering a welcome bonus of £5,000 for registered nurses, while the Priory Group is offering £5,000 for mental health nurses.

A survey by job search engine Adzuna found almost 5,000 vacancies across the UK currently offer signing-on bonuses for in-demand roles such as care workers, chefs and nursery staff.

The jump in wage growth in the UK, to 8.8% – the highest since records began in 2001 – as job vacancies hit a record high suggests that labour shortages are pushing up pay, in some sectors at least.

We know about the huge shortage of lorry drivers, for example, which has driven up their pay rates and prompted some companies to pay extra bonuses.

Tesco is offering a £1,000 signing-on fee for lorry drivers who join the company before the end of September, as it scrambles to overcome a desperate shortage of workers that has led to gaps on supermarket shelves.

Dixons Carphone, which owns the Currys PC World and Carphone Warehouse chains, is offering even more – a £1,500 retention bonus to its lorry drivers and the same cash incentive to new recruits.

Updated

Here is our full story on the UK labour market figures.

Martin Beck, senior economic advisor to the EY ITEM Club, says:

The speed at which the jobs market is recovering continues to surprise to the upside.

Looking ahead, the jobless rate could feasibly creep up in the short-term: an easing of restrictions has made searching for a job easier, and this could result in people moving from inactivity to seeking a job and therefore being picked up in the numbers again. But the risk of a serious increase in joblessness when the furlough scheme closes in September looks low. Job vacancies passed 1 million in July for the first time ever, and the ONS’ latest BIC survey showed the share of workers on furlough falling to 3.7% in late July – the smallest share since the pandemic began.

With the obvious caveat that CJRS has, and continues to insulate the UK unemployment rate - by any standards the latest U cycle looks to have peaked earlier & lower. Big test at end of September - but with low average age of remaining furloughed & record vacancies looks positive pic.twitter.com/w4IegZf9m8

— Simon French (@shjfrench) August 17, 2021

European stock markets open lower

European stock markets have fallen at the open, as expected.

  • UK’s FTSE 100 index down 0.25% at 7,135
  • Germany’s Dax down 0.3%
  • France’s CAC down 0.4%
  • Italy’s FTSE MiB down 0.68%
  • Spain’s Ibex down 0.6%

He reckons that recent gains in employment will be reversed once the furlough scheme ends.

Employment increased briskly in the second quarter as the economy reopened, though a backward step looms with the impending closure of the furlough scheme at the end of September.

The ONS’ Business Impact of Covid-19 showed that 3.7% of staff still were furloughed for at least some hours in the two weeks to July 25, even though all businesses were allowed to trade as normal. Many employers either will make these staff redundant or force them to accept fewer hours than they desire.

Our base case remains that the unemployment rate will rise to 5.2% in the fourth quarter, though uncertainty remains high about the extent to which business will retain staff that are currently surplus to requirements.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, has also looked at this.

Looking ahead, we see little risk of the upcoming burst of CPI inflation translating into a period of strong wage growth next year. Most public sector workers likely will see modest increases in their pay again next year, while job losses in the wake of the furlough scheme will help to keep a lid on private-sector settlements.

Accordingly, we continue to think that the labour market will lose its current momentum, enabling the MPC to wait until the first half of 2023 to raise Bank Rate.

Updated

Average weekly pay growth in the UK jumped from 7.4% in May to 8.8% in June, the highest since the series began in 2001 and above the Bank of England’s 8.5% forecast.

Ruth Gregory, senior UK economist at Capital Economics, says this

will fuel concerns on the monetary policy committee (MPC) that higher CPI [consumer prices index] inflation will persist in 2022.

The latest batch of labour market data brought signs that labour shortages are now feeding through into higher pay growth in certain sectors. However, underlying pay pressures were reasonably contained, and we suspect that beyond the next 6-12 months most of the labour shortages will begin to wane.

The figures add weight to our view that there won’t be a big shake-out in employment once the furlough scheme expires at the end of September.

Overall, we still think that the Bank of England won’t hike interest rates until mid-2023, rather than in mid-2022 as the markets expect. Today’s figures, however, suggest that the risks are tilted towards wage growth coming in a bit higher and the MPC raising rates a bit sooner than we anticipate.

Introduction: UK unemployment rate dips, job vacancies at record high

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The UK’s unemployment rate has dipped to 4.7% between April and June from 4.8% previously, according to the Office for National Statistics. This is better than economists expected.

The number of people in employment rose again, by 182,000 to 28.9 million in July, but remained 201,000 below pre-pandemic levels. As the economy recovered, job vacancies rose to a record high of 953,000 in May to July – 168,000 more than before the pandemic.

Growth in average total pay, including bonuses, increased to 8.8% and regular pay, stripping out bonuses, was 7.4% in April to June.

With the relaxation of many coronavirus restrictions, total hours worked went up, but remained below pre-pandemic levels. The redundancy rate declined on the quarter and has returned to pre-pandemic levels.

The ONS said there was no sign of redundancies starting to pick up ahead of the end of the government’s furlough scheme in six weeks’ time. The scheme has propped up Britain’s labour market through the Covid crisis and paid the wages on 8.9m jobs at its peak in May 2020, falling to 1.9m jobs at the end of June this year.

Rishi Sunak, the chancellor, said:

I know there could still be bumps in the road but the data is promising. There are now more employees on payrolls than at any point since March 2020 and the number of people on furlough is the lowest since the scheme launched.

.@jathers_ONS concluded (4/4) pic.twitter.com/zjYue8AiXE

— Office for National Statistics (ONS) (@ONS) August 17, 2021

Mims Davies, the minister for employment, said:

There are positive signs of recovery in today’s jobs figures with the number of young people and older workers on payrolls up on the quarter and the employment rate increasing to 75.1%.

There is still work to do and we’re focused on helping employers fill roles through our Plan for Jobs – giving people of all ages the skills, support and experience needed to confidently land that next opportunity.

Headline indicators for the UK labour market for April to June 2021 show

▪️ employment was 75.1%
▪️ unemployment was 4.7%
▪️ economic inactivity was 21.1%

➡️ https://t.co/GSaImsebrZ pic.twitter.com/JsyOF2V0xW

— Office for National Statistics (ONS) (@ONS) August 17, 2021

European stock markets closed lower yesterday after last week’s gains, while on Wall Street, the US equity rally continued. The S&P 500 hit its fifth consecutive all-time high on Monday, despite growing fears over rising Covid cases.

In Asia, stock markets fell, knocked by worries over China’s regulatory crackdown on tech firms – Japan’s Nikkei is down 0.28%, Hong Kong’s Hang Seng has slid 1.8% and the Australian market has lost 0.9%.

Chinese regulators issued draft rules for the internet sector on Tuesday, banning unfair competition and restricting the use of user data. Tech giants Tencent, Alibaba and Meituan fell 3.9%, 3.5% and 1.7% respectively in Hong Kong. European shares are set to open lower at 8am BST.

Markets are also tracking the worsening situation in Afghanistan.

Flights have resumed from Kabul airport after being paused for hours due to large crowds, as senior Taliban leader Amir Khan Muttaqi is believed to be in the Afghan capital holding talks with the city’s political leadership aimed at building a government.

You can read the latest news on Afghanistan here:

The Agenda

  • 10am BST: Eurozone GDP in second quarter (forecast: 2% quarterly rate, 13.7% annual rate)
  • 1.30pm BST: US Retail sales for July (forecast: -0.2%)
  • 2.15pm BST: US Industrial production for July (forecast: 0.5%)

Updated

Contributors

Julia Kollewe

The GuardianTramp

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Investors cautious as no deal Brexit threat looms; retail sales tumble – as it happened
Rolling coverage of the latest business and markets news, as Brexit jitters and retail data put investors on edge

Kalyeena Makortoff

18, Dec, 2020 @3:04 PM

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US retail sales in surprise rebound in June; eurozone inflation eases – as it happened
US retail sales rise 0.6% as Americans spend more on electronics, clothes and eating out, while eurozone inflation dips to 1.9%; Bank of Japan leaves policy unchanged and cuts growth forecast

Julia Kollewe

16, Jul, 2021 @2:14 PM

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FTSE 100 hits another record closing high - as it happened
All the day’s economic and financial news, as shares in London climb higher and finance ministers meet in Germany

Graeme Wearden

17, Mar, 2017 @5:02 PM

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UK retail sales bounce back but economists fear grim autumn ahead – as it happened
Rolling live coverage of business, economics and financial markets as retail sales volumes rise by 0.8% in August

Jasper Jolly

18, Sep, 2020 @2:03 PM

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European stocks hit record high despite coronavirus outbreak – as it happened
Rolling coverage of economics, markets and business as Chinese tariff cuts on US goods help to stimulate markets to record highs

Kalyeena Makortoff (now) and Jasper Jolly (earlier)

06, Feb, 2020 @12:51 PM

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Pound hits one-year high as UK inflation rate jumps to 2.9% - as it happened
All the day’s economic and financial news, including new figures showing how the cost of living in Britain jumped last month

Graeme Wearden

12, Sep, 2017 @2:53 PM