- Markets are happy despite stagflation concerns
- Is the UK set for Christmas shortages, and price rises
- Travel recovery hopes grow
Stocks bounce into September
Shares in London and Europe started September on the front foot, dismissing concerns around stagflation which were exacerbated by a leap in eurozone inflation to 3 per cent alongside waning business confidence and a dip in the Chinese manufacturing PMI into contraction territory. European PMI’s read a little better. Read Neil Wilson’s market outlook here.
Christmas crunch coming?
Are consumers set to be hit in the pocket this Christmas? The latest retail price data from the British Retail Consortium (BRC) indicated that some areas of the high street are beginning to see shop prices rise in reaction to the recent well documented supply chain shortages. August saw a 0.4 per cent increase in shop prices with much of this coming from the high street given that food prices actually dipped during the month, down 0.2 per cent.
Supply chain issues, particularly in electricals where semi conductors are in short supply worldwide, are being exacerbated by rising shipping costs and, in the UK particularly, a shortage of delivery drivers causing delays. Over the past month there have been early warnings about Christmas stock issues from grocer Iceland and toy and game retailer The Entertainer last week warned that issues in the supply chain could mean less choice for consumers this Christmas and lead to an eventual increase in prices of around 10 per cent over the next 18 months.
Read more:
Consumer giants gearing up to pass inflation on to customers
Lorry driver shortage not a threat to retail earnings - yet
Light at the end of the tunnel for travel
Trading figures from both aviation services specialist Menzies (MNZS) and retailer WH Smith (SMWH) both suggested some light at the end of a very long tunnel for the industry. Following on from Ryanair’s (RYA) update on Monday indicating it expects passenger numbers to pick up in the autumn, Menzies said that it had returned to profit in the first half of this year and that demand for its services, which include cargo handling and refueling was showing signs of a sustained pick up. That said, management did also add the caveat that it expects it to take until 2023 for demand to return to pre-pandemic levels. Menzies has cut its cloth accordingly over the past year, reflected in a fall in turnover in the first half but an underlying profit of £10.9m against a loss of £48.7m in 2020.
Meanwhile, WH Smith today guided that full year performance may slightly exceed expectations after a recovery in activity at its shops both on the high street and in travel locations - previously the main driver of growth pre-pandemic. While by no means out of the woods, Smiths reported sales across the group in the eight weeks to the end of August was at 71 per cent of pre-pandemic levels, up from 60 per cent in the first half. In the travel sector, which has been particularly hard hit during repeated lockdowns, sales were at 64 per cent of 2019 levels, up from 41 per cent in the first half.
House price cliff approaching?
Is the UK housing market set for a fall? With the stamp duty holiday finally tapering away this month house prices surged again in August but with the government tax break being removed will demand disappear? According to building society Nationwide’s latest house price index, the average UK house price in August was 12 per cent higher than a year previously, marking a monthly increase of a little more than 2 per cent - the second strongest monthly rise since 2016.
This marks a strong turnaround from a perceived wobble in the market in July which was seen to be a reaction to the first stage of the stamp duty tax break taper when it was withdrawn from properties in the £250,000-£500,000 bracket.
One major issue still facing the market is a lack of supply, something which has helped support demand and prices thus far - whether this remains a factor into the autumn remains to be seen but with the stamp duty tax break ending at the same time as furlough there is widespread expectation of a slowdown in house price inflation, at best.
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