Economic Highlights

September PMI surveys showed a decrease in Services activity (55.1 vs 55.9) as local lockdowns increased and “eat out to help out” expired. Meanwhile the grizzly details of the fiscal deficit were confirmed, with borrowing in August at £35.9bn, the third highest borrowing in any month since current records began in 1993. We remain on track for an annual deficit of some £350bn, with the OBR pencilling in £154bn for 2021/22. Can that realistically be paid back any time soon??

The US Housing Market remains in rude health overall. 6 million existing homes changed hands in August, with just over 1 million new homes also being sold, the latter figure handily beating forecasts. It seems as though citizens are falling over themselves to leave the big cities now that they can “work from home forever”. House prices are up an average 13%, although this does not reflect declines in places such as New York and San Francisco. Households saw their overall wealth increase by $7.6 trillion in Q2, having lost $7.2 trillion in Q1. So Covid has been good for national wealth. However, we also know that this has not been fairly distributed.

PMI data showed a similar trend to the UK. Services weakened (47.6 vs 50.5), with Manufacturing holding up (53.7 vs 51.7). An improvement in global trade is helping, but there is always a suspicion that inventories are rising too. Final sales need to kick higher to maintain growth.

The latest reading for Industrial Profits saw a y/y rise of 19.1%, down from 19.6% in July. China has managed Covid remarkably well – such are the benefits of a command economy, perhaps.