February 2022 Macroeconomic Update

In this shorter Macroeconomic update, the Young Fabians Economy and Finance Network outline February’s headline stats for the UK economy.

HEADLINERS: Main Economic Developments

These metrics are correct as of 21st February, unless stated.

  • GDP1: Monthly real gross domestic product (GDP) is estimated to have fallen by 0.2% in December 2021, compared with a 0.7% growth in November 2021. This means GDP is equal its pre-pandemic level (February 2020). Services were the main contributor to GDP’s 0.2% fall, detracting 0.4 percentage points from GDP growth, but this was partially offset by a positive 0.1 percentage point contribution from construction, while production made a negligible contribution.
  • Labour Force2:
    • Unemployment rate: The unemployment rate from October to December decreased to 4.1% (down 0.2 percentage points on the previous quarter).
    • Employment: The UK employment rate increased by 0.1 percentage points on the quarter to 75.5%.
    • Inactivity rate: Economic inactivity rate increased by 0.1 percentage points to 21.2%.
    • Job vacancies: Job vacancies continued record highs, reaching 1,298,000 (up 113,600 from the previous quarter).
  • Nominal wage growth: Growth in total average weekly earnings (including bonuses) has grown to 4.3% (3.7% excluding bonuses).
  • Real wage growth: In real terms (adjusted for inflation), wage growth fell by 0.1% for total pay, and by 0.8% for regular pay (which excludes bonuses).
  • Productivity3: Output per hour worked grew by 1.0% on the previous quarter in Quarter 4 (Oct to Dec) 2021.
  • NEET4: Young people (16-24) not in education, employment or training (NEET) stood at 10.1% from July to September 2021, up from 9.3% the previous quarter. However, in the two previous periods there were large falls, and long-term trend is down.
  • Inflation rate5:
    • CPIH: The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 4.9% in the 12 months to January 2022, up from 4.8% in the 12 months to December 2021. On a monthly basis, CPIH was unchanged in January 2022, compared with a fall of 0.1% in January 2021.
    • CPI: The Consumer Prices Index (CPI) rose by 5.5% in the 12 months to January 2022, up from 5.4% in December 2021. On a monthly basis, CPI fell by 0.1% in January 2022, compared with a fall of 0.2% in January 2021.
    • PPI6: The headline rate of output prices showed positive growth of 9.9% on the year to January 2022, down from 9.3% in December 2021. The headline rate of input prices showed positive growth of 13.6% on the year to January 2022, down from 13.8% in December 2021.
  • Interest rates7: In February 2022, the Bank of England raised the Bank Rate from 0.25% to 0.5%. This was to help bring the rate of inflation down.
  • UK stock indices8:
    • FTSE 100: FTSE 100 companies are up 2.57% over the past month, and 13.19% over past year.
    • FTSE All-share: The FTSE All-share is up 1.78% (month-to-day) and up 10.87% (year-to-day).
    • FTSE 250: FTSE 250 is down 1.66% this month, but up 0.55% YTD.
    • FTSE SmallCap: FTSE small cap companies are down 0.85% MTD, but are up 7.48% YTD.
  • Global stock indices9:
    • S&P 500 (US): Down 1.12% MTD, up 12.19% YTD.
    • Nasdaq Composite (US): Down 1.60% MTD, up 0.11% YTD.
    • Nikkei 225 (Japan): Down 2.46% MTD, down 10.76% YTD.
    • Hang Seng (Hong Kong): Down 1.97% MTD, down 4.17% YTD.
    • EURO STOXX 600 (EURO): Down 0.34% MTD, up 10.11% YTD.
  • Volatility10: The VIX index, which represents the market’s expectations for volatility (i.e. fear/ uncertainty) over the coming 30 days, is down 3.81% MTD, but is up 18.34% YTD.
  • Corporate Bond Index11: S&P UK Investment Grade Corporate Bond Index has fallen 1.75% MTD, and fallen 4.54% YTD.
  • Gilts12: Yield on a 10-year UK government bond is 1.41%.
  • Exchange rates13:
    • SERI: The Sterling Exchange Rate Index (SERI) measures sterling’s value against a ‘basket’ of currencies, based on currencies’ relative importance in UK trade. SERI rose by 1.7% between December and January.
    • GBP/USD (Cable): GBP has got stronger against the dollar from December 2021 to January 2022 by 2.0%.
    • GBP/EUR: GBP has risen against the euro by 1.7%.
  • Oil prices14: Brent crude oil is currently $93.90 per barrel, up 6.8% MTD, and 48.7% YTD.
  • House Prices15: House prices in January 2022 are 9.7% higher than January 2021.
  • Purchasing Managers’ Indices (PMIs)16: Services PMI picked  slightly in January 2022, after hitting a 10-month low in December 2021. Construction PMI was also up. However, Manufacturing PMI fell slightly.
  • Index of Production17: Output is 2.6% below its pre-pandemic February 2020 level. This is despite monthly production rising between November and December 2021by 0.3%.
  • Consumer Confidence Index18: GfK Consumer Confidence Index showed a drop of four points in January to -19.
  • Retail Sales19: Retail sales volumes rose by 1.9% in January 2022 following a fall of 4.0% in December 2021. Sales volumes were 3.6% above their pre-coronavirus February 2020 levels.
  • Public sector finances20:
    • Net borrowing: Public sector net borrowing excluding public sector banks (PSNB ex) was estimated to have been £16.8 billion in December 2021, one of the highest December borrowing since monthly records began in 1993. However, it was £7.6 billion less than in December 2020.
    • Net debt: Public sector net debt excluding public sector banks (PSND ex) was around £2.3 trillion which equates to c.96.0% of GDP, the highest ratio since March 1963 when it was 98.3%.
  • Trade21:
    • Goods imports: Total imports of goods, excluding precious metals, increased by £0.6 billion (1.4%) in December 2021, fuelled by imports from non-EU countries.
    • Goods exports: Total exports of goods, excluding precious metals, increased by £1.1 billion (3.9%) in December 2021, fuelled by exports to EU countries.
    • Goods deficit: The trade in goods deficit, excluding precious metals, narrowed by £0.2 billion to £43.0 billion in Quarter 4 2021, as export growth exceeded import growth.
    • Services surplus: The trade in services surplus reduced slightly in Quarter 4 2021 to £30.2 billion.
    • Trade deficit: The total trade in goods and services deficit, excluding precious metals, narrowed by £0.2 billion to £12.8 billion in Quarter 4 (Oct to Dec) 2021.

This post was authored by Dominic Shaw, Chair of the Young Fabian Economy and Finance Network.

From next month, the structure of the updates will likely change. If you have any views on what you would like to see from the updates, or you would like to be involved in the next edition, please reach out to us via our email address: [email protected].

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1 ONS.

2 ONS.

3 ONS.

4 ONS.

5 ONS.

6 ONS.

7 Bank of England.

8 Google Finance.

9 Ibid.

10 Ibid.

11 S&P.

12 Bloomberg.

13 Bank of England.

14 Business Insider.

15 Halifax.

16 IHS Markit.

17 ONS.

18 GfK.

19 ONS.

20 ONS.

21 ONS.

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