Summary

  • There was a sharp plunge in the GfK Consumer Confidence Barometer in October 2020
  • The sentiments of the British consumers fell the most since the start of the coronavirus pandemic with the tightening of lockdown restrictions
  • The economists are fearing that the rebound which was driven by the pent-up demand is likely to fade, unemployment being the biggest concern

The United Kingdom is currently experiencing the second wave of the Covid-19 with tougher social distancing restrictions being introduced. The prime minister has strengthened the social distancing measures currently in force in the UK to curb the spread of the disease.

A survey said that the sentiments of the British consumer fell in October 2020 the most since the start of the coronavirus pandemic with the tightening of lockdown restrictions across much of the country.

Though the consumer confidence index of the UK jumped to its highest level in September since the coronavirus lockdown started in March, there was an unexpected plunge in the GfK Consumer Confidence Barometer from -25 in September to -31 in October 2020. The index recorded its lowest level since late May while tumbling down sharply from a nine-month high in September.

The survey was carried out in the first half of the month, between 1 October 2020 and 14 October 2020, before cities like Manchester moved to the highest tier of Covid-19 lockdown. It was conducted among the people from the European Union, on behalf of the European Commission.

Households’ outlook for the economy over the next 12 months has mainly contributed towards the negative movement of the consumer confidence index. Moreover, the GfK has warned that there is a risk of the sentiments falling further. Joe Staton, GfK’s director said that the personal financial situation and even deeper fears over the state of the UK economy has led to this drastic decline in the index.

Strong demand for consumer discretionary products was the major factor that helped Britain in recovering from the initial shock of the coronavirus lockdown. The months of July and August saw a rise in the retail sales reaching above the pre-pandemic levels and the number of house purchases in September recorded a good yoy growth.

 

Retail Sales

The latest government estimates of retail sales in the UK revealed the following:

  • The retail sales volumes increased by 1.5 per cent in September 2020 in comparison with August, recording a growth in the fifth consecutive month, leading to an increase of 5.5 per cent when compared with February 2020.
  • Non-food store sales have show signs of recovery at 1.7 per cent above their February levels. The food sales have also performed well.
  • Retail sales volumes increased by 17.4 per cent during the three months to September, when compared with the previous three months.
  • Fuel sales volumes in September were 8.6 per cent below the February levels because of reduced travel and continuation of work from home.
  • Clothing sales volumes were also 12.7 per cent below the February figures.
  • In September, increased sales in home improvement were observed driven by household goods and garden item purchases.
  • Online sales’ proportion was recorded at 27.5 per cent, in comparison with 20.1 per cent reported in February 2020.

 

The economists are fearing that the rebound which was driven by a pent-up demand is likely to fade soon, unemployment being the biggest concern. Finance minister, Rishi Sunak announced a fresh set of changes to the replacement of the furlough programme on 22 October 2020.

 

Employment outlook

The employment rate had slowed down since the beginning of the Covid-19 pandemic in the UK. On the other hand, the job losses and redundancies are on the rise, as per the latest government estimates. The ONS (Office for National Statistics) employment estimates released on 13 October 2020 suggest the following:

  • The number of payroll employees has fallen by 673,000 since March 2020.
  • The figures for the period of June to August 2020 witnessed an increase in the unemployment rate and the number of redundancies, while the employment rate continues to fall.
  • The total hours worked had a significant increase in the quarter ending September, as compared with the June to August period, although it had been decreasing over the year.
  • In September 2020, the claimant count reached 2.7 million.
  • Vacancies in July to September 2020 recorded quarterly increase of 144,000 to 488,000 after a record low of 343,000 vacancies in April to June 2020 quarterly period.

 

Let us now take a look at the stock performance of two companies that have recently announced job losses.

Marston’s PLC (LON: MARS)

The pubs and brewing company Marston’s which owns 1,400 pubs, restaurants and hotels has announced cutting of 2,150 jobs, because of the UK government imposing restrictions to curb the spike in Covid-19 cases. This has been the deepest cut in the sector since the pandemic began.

The stocks of MARS were trading at GBX 49.50 on 23 October 2020 at 3:30 PM, up by 4.78 per cent from its previous close of GBX 47.24. The 52-week low/high price was GBX 22.20/131.40. It was having a market capitalisation (Mcap) of £299.52 million.

 

Ryanair Holdings PLC (LON: RYA)

The airline company, Ryanair has planned to cut one-third of the number of its winter flights of Covid air travel restrictions across the EU. The company has consequently warned of further job losses as passenger numbers plummeted.

The stocks of RYA were trading at GBX 12.99 on 23 October 2020 at 3:32 PM, up by 0.93 per cent from its previous close of GBX 12.87. The 52-week low/high price was GBX 8.14/16.10. It was having a market capitalisation (Mcap) of £12,314.11 million.

 

 

 

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