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UK Weekly Commentary - 02 June 2020

UK weekly commentary from Awa Brokers covering highlights, what we’re thinking about the markets and what your clients may be asking this week.


What we think

Dr Dayo Abinusawa MBA, PhD (Cantab), Head of Strategy and Research on what this report says about the economy.

The Covid-19 outbreak continues to impact the economy and financial markets, in areas such as consumer credit, mortgage approvals, house prices, and money supply. Across key economic events and indicators, a trend reversal is observed, as economic activity data underscore contraction in growth.

Week ahead

Manufacturing PMI (May - The Manufacturing Purchasing Managers’ Index increased from 32.6 to 40.7 as expected. The reading is below the 50 level above which the index would signal growth.


Nationwide HPI (YoY) (May) - Annual house prices expected to decline to 2.8%, down from 3.7% in April. Annual house price growth increased to 3.7% in April, up from 3% in March – the fastest pace since February 2017.


Nationwide HPI (MoM) (May) - Monthly house prices are expected to decline to -1% from 0.7% in April. There has been a month on month gains for the last seven months in a row, after taking account of seasonal effects.


BoE Consumer Credit (Apr) - Consumer Credit dropped to GBP 3.841 billion in March and is expected to reach GBP 4.500 billion in April. The amount borrowed by consumers to buy goods and services continues to decline.


M4 Money Supply MoM (Apr) - Actual money supply rose from 0.3% in February to 2.8% in March, and is expected to drop to 0.6% in April, a reversal to previous figures seen in January.


Mortgage Approvals (Apr) - The number of mortgage approvals for house purchase is expected to decrease from 56.16K in March to 23.78K. The lockdown measures through April and May have impacted mortgage approvals.


Mortgage Lending (Apr) - Mortgage lending is expected to decline from 4.80 billion in March to 1.15 billion. March readings beat forecast by 1.3 billion.


Net Lending to Individuals - The total value of new credit extended to consumers declined over the last five months, from a high of 5.8 billion (actual) in January to a low of 1.0 billion (previous).


10-Year Treasury Gilt Auction - The 10-Year Treasury yield continues to tumble as the rate on Treasury Gilt fell from 0.794% in January to 0.260% in April.


BRC Shop Price Index (YoY) - Shop prices have fallen after weak consumer demand amid the crisis. The latest BRC Shop Price Index revealed that prices dropped by 1.7% in April, compared with a 0.3% decline in January.


Composite PMI (May) - The Composite PMI went up to 28.9 in May from 13.8 in April, beating the market forecast of 12.9. The reading is forecast to remain at current levels and points to an improvement on the previous month but still a contraction in the private sector.


Services PMI (May) – Currently at 27.8, the UK Services PMI is up 14.4 on previous readings, but still far below the 50.0 value that separates expansion from contraction. In each of the past three months, the rate of decline in service sector activity has been faster than anything seen prior to this since July 1996. The index is expected to reach 28.0.


Construction PMI (May) - The Construction PMI slumped to 8.2 in April, down from 39.3 in March. Construction activity in the UK fell to a record low in April as the industry closed sites to manage the spread of coronavirus. As lockdown restrictions ease, the reading is forecast to reach 29.7 in May.


GfK Consumer Confidence (Jun) - Consumer Confidence is expected to remain at -34. This paints a pessimistic picture of consumer confidence throughout the UK.


Halifax House Price Index (MoM) (May) – Price of homes and properties continues to slump. House prices are forecast to reach -0.7, following a -0.6 decline in April. There has been a month on month decline over the past five months.


Halifax House Price Index (YoY) - The price of homes and properties rose 2.7% from a year earlier, following a 3.0% increase in the previous month, as the impact measures taken to contain the spread of Covid-19 started to filter through the housing market.


CFTC GBP speculative net positions - The CFTC Commitments of Traders report in the week ended May 29 shows that actual net positions edged slightly lower, by 3.3K contracts, to -22.3K. Speculative positions reduced during the week.

*For professional clients and qualified investors only

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