To cushion the economic fallout of a second lockdown in England, the Bank of England is expected to supplement the extended Job Retention Scheme with a further dose of monetary stimulus later this week. And that’s after the small matter of an historic US election.
With a reality check on the recovery having been provided in recent weeks, forecasters are beginning to trim their expectations for the recovery in 2021. While labour market data underlines how the damage to date has been felt most keenly by the young.
Customarily a month renowned for beer festivals, October is shaping up to be quite the opposite this year with restrictions around the hospitality sector to varying degrees across the UK. Indeed, time has been called across the pubs in Scotland’s central belt. Daily Covid-19 cases continue to surge across much of Europe, snuffing out any glimmer of hope for a V-shaped recovery. The ball is in the policymakers’ court, yet again.
Changes in our behaviour amidst a second wave are becoming ever more apparent. While renewed restrictions are weighing on economic activity in much of Europe – including Northern Ireland. Over in the US, the fear is policy paralysis will undermine the recovery. Buckle up for a bumpy Autumn.
In the face of increased restrictions and signs of waning economic momentum policy support is being dialled up. While data last week laid bare the mounting level of public debt as revenues decline and spending balloons. Farewell furlough.
Consumers have been driving the recovery in developed countries. But signs of fatigue are beginning to show. With much of the initial pent up demand sated and labour market stress building, policy makers are increasingly being called upon to do the unexpected. Is the Bank of England finally coming to terms with negative rates?
Staging a retreat from outsized policy stimulus was never going to be straightforward. Indeed in many countries the trend is in the other direction. The French government has announced a €100bn stimulus plan, while its Spanish and German counterparts look set to extend their furlough schemes. Might the UK recovery need a bit of a helping hand, too in the coming months?
Acknowledging the damage inflicted by the crisis, and the lessons of recent years, central bankers are fine-tuning their tools, downgrading inflation worries and putting more weight on boosting employment. Easy monetary policy is here to stay.
A solid report card on the recovery in this week’s data – retail sales above pre-Covid levels, PMI levels marching upward and 95% of businesses back up and trading. In many respects the worst appears behind us. Unfortunately that can’t be said for the labour market. Meanwhile the familiar choreography of Brexit talks continues.
Two things are becoming increasingly clear. The low hanging fruits of the recovery may have been plucked, things look set to get harder from here. While policy support needs to remain in abundance to help the recovery along.
