An interesting fact: marmalade has seen a rapid rise in sales surging by 18%, as the nation paid its respects to the Queen. Sales of supermarket own brands continue to surge in an effort to battle the cost-of living crisis. Sales of wonky fruit and vegetables have soared 38% and Lidl is the fastest growing grocer for the fifth month in a row. This week 76% of all adults reported being very or somewhat worried about rising costs of living in the past two weeks.
Economy
- The UK Business Activity Index decreased from 49.6 in August 2022 to 49.1 in September 2022.
- The Future Business Activity Index decreased from 67.8 in August 2022 to 64.4 in September 2022, meaning the degree of optimism towards business growth is at its lowest level since May 2020.
- Out of the 12 UK regions, the West Midlands was third highest for Future Business Activity in September 2022.
- Petrol prices are climbing following the announcement from OPEC that it will be cutting output by 2m barrels per day, equivalent to 2% of the global supply. The cut was far greater than forecasters
- The IMF is forecasting 3.2% growth for this year and 2.7% growth for next year, a result of the world’s three largest economies – the USA, the Euro area and China – continuing to stall in terms of growth.
- This week the IFS released their Green Book 2022 report. The report included analysis of the global economic outlook their key findings were:
- The economy will grow by 2.9% this year and 2.5% next year, below the long run average of 3%. Europe, in the short term, and the US, later in 2023, are likely heading for recession.
- The increase in gas prices alone is imposing a burden of up to 8% of GDP on European households and firms.
- A series of supply shocks has driven global inflation to 7% this year, 6% in 2023 and 3.5% in 2024, above the global long-run average of 3%. Therefore, inflation set to stay and should trigger further significant interest rate hikes from central banks.
- The IFS alongside Citi, has predicted that to fund the spending in the mini budget, would require significant fiscal tightening in the medium-term, the costed plan is set to be released by the Chancellor later this month. Under the central forecast, it would require fiscal tightening of £62bn in 2026-27 to stabilise debt as a fraction of national income. Tax cuts would not be enough, even if the tax cuts did generate higher growth, growth of 0.25% a year stronger than predicted, would still require fiscal tightening of £41bn to stabilise debt. This will mean significant cuts in government spending.
- Government borrowing costs continued to soar, placing further pressure on mortgage and business borrowing costs. This has heightened concern around pension funds selling off government debts in a “fire sale dynamic”. To stem this, the Bank of England (BoE) has stepped in by buying more government bonds to try and stabilise their price and prevent selloffs.
- The West Midlands Business Activity Index (PMI) decreased from 49.3 in August 2022 to 47.8 in September 2022, the second month in a row to register a decline. Output has fallen at its quickest pace since January 2021. Out of the 12 UK regions, the West Midlands was the sixth highest for Business Activity in September 2022.
- Take-home grocery sales rose by 4.8% in the 12 weeks to 2 October 2022 while grocery price inflation has hit another new peak, according to Kantar’s latest figures. Grocery inflation now stands at 13.9%, a record high since Kantar began tracking prices in this way during the 2008 financial crash. Kantar is forecasting that the average household is facing a £643 jump in their annual grocery bill to £5,265 if they continue to purchase the same items.
- MillionPlus has published a new report, which highlights the plight of students in the cost of living crisis. Maintenance rises are outstripped by price rises. Many students are not eligible for any cost-of-living benefits and may not be able to access the energy relief as they often pay rent ‘all bills included’. Prior to current crisis, 52% were already concerned about the cost of living. There are significant numbers of students at risk, including older students, those who commute, and those from some ethnic minority group or lower socio-economic backgrounds. Already universities in the region are setting up onsite foodbanks to provide students with emergency food parcels.
- Around 26% of households across the UK are on a variable rate on their mortgages. If the same average was applied to the WMCA area, this would mean around 135,011 households could be facing large rises in the mortgages. Mortgages have now hit 6%, this will mean for variable rate holders, first time buyers and re-mortgagers, repayment will rise to £1,514 per month. This is an additional £478 per month or an additional £5,736 per year, 31% of their total earnings.
Labour Market
- For the UK, early September figures indicate that the number of payrolled employees rose by 2.5% (+714,000) compared with last September – all age groups saw an increase; there was an increase of 165,000 payrolled employees aged under 25 years.
- From June to August 2022, reports of UK-wide redundancies in the 3 months prior to interview increased by 0.5 per thousand employees compared with the previous 3 month period, to 2.4 per thousand employees.
- The UK employment rate was estimated at 75.5% in the latest period (June to August 2022), which is 0.3 percentage points lower than the previous three-month period (March to May 2022) and 1.0 percentage points lower than before the pandemic (December 2019 to February 2020).
- There are several notable trends regarding UK employment rate. The number of full-time employees decreased during the latest three-month period but is still above pre-pandemic levels. Part-time employees had generally been increasing since the beginning of 2021; there was, however, a decrease during the latest three-month period. The number of self-employed workers fell in the first year of the coronavirus pandemic and has remained low, although the number has increased during the latest three-month period for both the full-time and part-time self-employed. Previous evidence has shown that people aged 65 years and over have driven recent increases in self-employment.
- The UK unemployment rate was estimated at 3.5% in June to August 2022, which is 0.3 percentage points lower than the previous three-month period and 0.5 percentage points below pre-pandemic levels. Over the latest three-month period, the unemployment rate decreased to the lowest rate since December to February 1974.
- The UK economic inactivity rate was estimated at 21.7% in June to August 2022, which is 0.6 percentage points higher than the previous three-month period and 1.4 percentage points higher than before the pandemic.
- For the UK, the number of job vacancies in July to September 2022 was 1,276,000; this was a decrease of 3.6% (-46,000) from the previous quarter – the third consecutive quarterly fall.
- UK growth in average total pay (including bonuses) was 6.0% and growth in regular pay (excluding bonuses) was 5.4% among employees in June to August 2022; this is the strongest growth in regular pay seen outside of the coronavirus pandemic period. Growth in total and regular pay fell in real terms (adjusted for inflation) on the year in June to August 2022, at 2.4% for total pay and 2.9% for regular pay; this is slightly smaller than the record fall in real regular pay we saw April to June 2022 (3.0%) but remains among the largest falls in growth since comparable records began in 2001.
- In the year ending June 2022, the employment rate in the WMCA (3 LEP) area was 71.7%, compared to 75.4% for UK-wide. This was a 0.9pp decrease in the employment rate for the WMCA (3 LEP) area when compared to the year ending June 2021. UK employment rate increased by 1.1pp over the same period.
- The economic activity rate for the WMCA (3 LEP) area was 76.0% compared to 78.4% for the UK in the year ending June 2022. For the WMCA (3 LEP) area, there has been a 1.4pp decrease in the economic activity rate, the UK increased by 0.1pp since the year ending June 2021.
- The economic inactivity rate for the WMCA (3 LEP) area was 24.0% compared to 21.6% UK-wide for the year ending June 2022. For the WMCA (3 LEP) area, this increased by 1.4pp, while the UK decreased by 0.1pp since the year ending June 2021.
- In the year ending June 2022, the modelled unemployment rate in the WMCA (3 LEP) area was 5.6%, compared to 3.9% for England-wide. This was a 0.6pp decrease in the unemployment for the WMCA (3 LEP) area when compared to the year ending June 2021. England-wide unemployment rate decreased by 1.2pp over the same period.
- There were 145,065 claimants in the WMCA (3 LEP) area in September 2022. Since August 2022, there has been an increase of 1.1% (+1,645) claimants in the WMCA (3 LEP) area, while the UK increased by 0.9%. When compared to March 2020 (pre-pandemic figures), the number of claimants has increased by 23.4% (+27,475) in the WMCA (3 LEP) area, with the UK increasing by 20.9% over the same period.
- There were 25,405 youth claimants in the WMCA (3 LEP) area in September 2022. Since August 2022, there was an increase of 1.9% (+485) youth claimants in the WMCA (3 LEP) area, while the UK increased by 1.5%. When compared to March 2020 (pre pandemic figures), the number of youth claimants has increased by 12.5% (+2,825) in the WMCA (3 LEP) area, with the UK increasing by 7.2% over the same period.
Trade
- The West Midlands region’s total value in goods exports increased by £321m (+1.2%) to £26.5bn in year ending Q2 2022. The overall value of UK trade in goods exports increased at a greater rate, by 12.3% (to £338.4bn).
- The value of West Midlands region’ imports increased by £6.3bn (+19.2%) to £39.3bn in year ending Q2 2022. The UK-wide total imports increased by 25.0% to £553.6bn over the same period.
- The West Midlands had a trade in goods deficit of £12.8bn in the year ending Q2 2022.
- The largest value goods exports for a SITC section in the West Midlands was machinery & transport at £17.1bn. This SITC section accounted for 64.7% of the total exports value; of which 57.8% (£9.9bn) were non-EU exports. Compared to year ending Q2 2021, the total value of these exports has decreased by £670m (-3.8%). Separately, manufactured goods exports demonstrated a recovery in the year to Q2 2022 compared to the year before (+22.4% or £608m).
- The highest value of West Midlands goods exports was to the EU at £12.8bn, accounting for 48.3% of the total in year ending Q2 2022. Exports to the EU from the West Midlands increased by nearly £901m (+7.6%) since year ending Q2 2021 – below the UK overall growth (+18.4%).
ONS reporting
- Nationally, between the 23rd and 30th September 2022, total online job adverts increased by 0.4%. On the 30th September 2022, total online job adverts were at 115.5% of their average level in February 2020.
- As of the 16th September 2022, for the West Midlands region visits to retail and recreation, transit stations and workplaces had not yet returned to pre-coronavirus levels.
- Excluding “not sure” responses, 32.4% of responding West Midlands businesses reported to exporting within the last 12 months, 4.9% reported to exporting over 12 months ago.
- 9% of West Midlands businesses reported fixed gas prices were expiring by 31st December 2022. While 19.0% of West Midlands respondents reported gas prices were already on variable rates. 13.1% of West Midlands businesses reported fixed electricity prices were expiring by 31st December 2022. 17.3% of West Midlands respondents reported electricity prices were already on variable rates.
- 3% of West Midlands expect gas bills to increase by more than 300% once the fix contract ends and 18.2% of West Midlands expect electricity bills to increase by more than 300% once the fix contract ends.
- 9% of West Midlands businesses reported to currently experiencing a shortage in workers. Although, 48.9% reported no shortages in workers.
- 7% of West Midlands businesses reported that the worker shortage had caused employees to work increased hours.
- 6% of West Midlands businesses are very concerned about the impact of climate change may have on the business and a further 44.4% were somewhat concerned. While 19.6% of West Midlands businesses reported no concerns.
- 1% of West Midlands businesses have a climate change strategy to help protect the environment.
- 28% of those who are currently paying rent or mortgage payments reported they are finding it very or somewhat difficult to make these payments.
Download and view a copy of the West Midlands Economic Monitor
City-REDI / WMREDI has developed a resource page examing the impact of Coronavirus (COVID-19) on the West Midlands and the UK. It includes previous editions of the West Midlands Weekly Economic Monitor, blogs and research on the economic and social impact of COVID-19. You can view it here.
This blog was written by Anne Green, Professor of Regional Economic Development at City-REDI / WMREDI, University of Birmingham.
Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI, WMREDI or the University of Birmingham.