The Daily Update: Upbeat UK Outlook / US Home Sales Misses

According to the updated forecast published by EY Item Club, the UK economy is now predicted to grow at its fastest rate, 7.6%, since 1941. The successful swift rollout of Covid vaccines along with the surge in consumer spending has improved the outlook for Britain’s economy. In April, the EY Item Club had expected the economy to grow by 6.8%. The rapid opening up of those parts of the economy that were hardest hit by the pandemic, the high street, leisure, and hospitality has helped households spend some of the estimated £200bn in savings accumulated during lockdown.

Senior economic advisor to the EY Item Club, Martin Beck said ‘Vaccines have played a key role in bringing forward the reopening of the economy and have been a key factor in the upgrades of the forecast throughout this year’ adding ‘Compared to other economies, the UK is much more dependent on consumer spending on services, such as recreation and leisure activities, which meant that lockdowns had a greater economic impact here than elsewhere. Reopening these face-to-face parts of the economy means the UK should have a correspondingly faster recovery.

There was a caveat to the upbeat assessment. The report warned that the ‘future pattern of the pandemic and any renewed pandemic-related restrictions will have a significant bearing on whether the forecast is achieved’.

The Club also expects unemployment to rise in the second half of the year, to just over 5% after which they see it falling back to 4.6% next year.

Yesterday in the States we also had new homes sales data released, which showed the sales of new U.S. homes surprisingly dropping in June to the lowest since April 2020, with sales in the month earlier also revised lower. New home sales fell 6.6% to a seasonally adjusted annual rate of 676,000 units last month, the estimates were for a rise of 3.5%.