A lot of attention is going to gravitate towards the cost pressures within the private sector that the UK PMI picked up on.
Manufacturers flagged shortages of raw materials and high shipping costs, while service providers highlighted increased staff salaries.
Although that led to the strongest inflation rate on record as measured by output prices charged, Markit, like the Bank of England, expects those price pressures to fade.
UK experiencing ‘unprecedented growth spurt’
The UK private sector has signalled its fastest output growth for more than two decades, according to data from IHS Markit, although services fell slightly below economists’ expectations.
Chris Williamson, Chief Business Economist at IHS Markit, commented:
The UK is enjoying an unprecedented growth spurt as the economy reopens. Factory orders are surging at a record pace as global demand for goods continues to revive, and the service sector is reporting near-record growth as the opening up of the economy allows more businesses to trade.
The strongest upturns in demand were reported for hotels, restaurants and other consumer-facing services, though improvements were reported across the board in all sectors.
Even with a near-record burst of hiring, the survey saw the largest ever reported rise in backlogs of uncompleted work and a severe worsening of supply chain delays as companies struggled to meet the surge in demand.
A direct consequence of demand running ahead of supply was a steep rise in prices, hinting strongly that consumer price inflation has much further to rise after lifting to 1.5pc in April.
However, the inflationary spike could prove temporary, as many of the price hikes have reflected surcharges on shipping and other shortage-related issues emanating from the pandemic. As these constraints ease, price pressures should abate, but there remains a great deal of uncertainty as to how long it will take for global business and trade to return to normal functioning, especially if new virus variants appear.
UK services PMI falls below expectations
Trucker shortages pose ‘extreme barrier’ to pandemic recovery, says Logistics UK
Almost a third of UK logistics companies expect to face trucker shortages this year and a 10th say recruitment issues will pose an “extreme barrier” to the recovery of their business from the pandemic, according to lobby group Logistics UK.
The group is calling on the government to provide interest-free loans or grants to train more drivers to fill trucking jobs.
Some 110 trained truck drivers claimed unemployment benefits in January, down 27pc from a year ago.
Data from job search engine Adzuna show online advertisements for transport, logistics and warehouse jobs in February were 15pc above the same period last year.
B&Q owner shares drop 3.7pc
Shares in B&Q owner Kingfisher were trailing in the FTSE 100, down 3.7pc this morning.
Traders were responding to the DIY retailer’s annual 7.2pc sales rise it reported yesterday, with analysts suggesting the company could struggle to maintain Britons’ enthusiasm for home improvements as the rest of the economy reopens.
“As more people leave furlough schmes and return to full time working once more, the DIY craze is likely to wane a little, although a buoyant house market is likely to keep our passion for decoration relatively high,” said Hargreaves Lansdown’s Susannah Streeter.
Banks drag FTSE below 7,000
The FTSE 100 has fallen below 7,000 points this morning, as weakness in banks countered a bigger-than-expected jump in retail sales.
The index slid down 0.33pc, with banks including HSBC Holdings, NatWest Group, Prudential Plc and Standard Chartered among the biggest drags.
Miners including Anglo American Plc, Glencore Plc and Rio Tinto all fell between 0.2pc and 0.6pc.
The domestically focussed mid-cap FTSE 250 index was also in the red, down 0.19pc.
Retail sales surged by 9.2pc in April, when non-essential shops reopened after months of closure due to coronavirus restrictions, their biggest jump since a previous reopening in June, official data showed.
Britain’s biggest seller of building materials, Travis Perkins, rose 1.7pc after selling its plumbing and heating business to an affiliate of investment firm H.I.G. Capital for £325m ($461m).
FTSE is down 0.27pc
The FTSE 100 is down 0.27pc in early trading, trading at around 7,000 points.
Food store sales drop 0.9pc
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, comments on why food store sales have dropped while other sales, such as fuel, are rising:
With hospitality reopening after the Easter break, it sucked grocery spend away from supermarkets and into the tills of restaurants, cafes and bars.
Food store sales volumes declined by 0.9pc in April 2021 following three consecutive months of growth since December 2020.
But food store sales remain considerably higher than their pre-pandemic level, with sales in April 2021 8.6pc higher than in February 2020.
Retail sales by sector
Danni Hewson, financial analyst at AJ Bell, comments:
Clothing sales surged by 69.4pc and non-clothing 25.3pc in April compared to the previous month.
Petrol sales were also given a boost as workers began to drift back into offices and the opportunity for socialising and indulging was presented. So far so good for physical retail, and online sales were down 5.6pc when compared with the previous month.
But a more accurate picture emerges when we compare this month’s sales figures with those of April 2019. In that period online retailers have enjoyed the largest growth, up a whopping 56pc and fuel sales are 13.3pc down compared with two years ago, demonstrating that homeworking is still a big part of our working lives.
Overall, retail sales were considerably above their pre-pandemic levels (10.6pc) but novelty and savings will undoubtedly have played a part in this month’s rise and this trajectory is unlikely to continue as consumers get more opportunities to spend their cash elsewhere.
Expert reaction: Retail sales surge 9.2pc
Aled Patchett, head of retail and consumer goods at Lloyds Bank, reacts:
April was always likely to see a further surge in sales as stores re-opened for the first time in months – with fashion retailers the ultimate beneficiaries of beer gardens re-opening and the ‘rule of six’ night out returning.
The high street will be hopeful that the re-emergence of indoor hospitality this week continues to bring shoppers back out in force to accelerate its recovery into the summer.
That said, optimism remains cautious, particularly given the presence of new emerging variants which could see shoppers return to the online habits that have become so dominant over the past 12 months – something that may have happened anyway once the novelty of the bricks and mortar experience wore off.
Independent retailers will also be wary of the need to establish new rent agreements with landlords, given the upcoming eviction moratorium deadline next month, with many likely to be balancing new turnover-based approaches with the need to address deferred payments from the past year.
Bricks and mortar regains ground
Perhaps unsurprisingly, bricks-and-mortar stores were the main winners from the reopening on April 12. The ONS reports that all sectors reported a decline in the proportion of sales made online during the month.
It says: “The total proportion of sales online decreased to 30.0pc in April 2021, down from 34.7pc in March 2021.”
Retail sales jump
Retail sales volumes were 42.4pc higher in April 2021 than in April 2020, during the first national lockdown, the ONS reports.
However it warns that “base effects” make this an inaccurate comparison, so prefers to measure it against February 2020, before the pandemic. “
Total retail sales levels for both the amount spent and quantity bought were up 9.9pc and 10.6pc respectively compared with their pre-coronavirus (COVID-19) pandemic February 2020 levels,” it says.
Retail boost for the economy
Good morning. Sterling has climbed to $1.4199 after fresh data showed retail sales jumped 9.2pc in April compared to March.
The better than expected jump in trading followed the reopening of non-essential shops on April 12.
Compared with April last year – during the first national lockdown – sales were up 43pc, the Office for National Statistics said. Sales were also 9.9pc higher than the last month of trading before Covid-19 hit.
5 things to start your day
1) Trainline shares crash amid panic over state-owned ticketing site: George Soros among a clutch of hedge fund investors who booked tens of millions of pounds in paper profits after betting on a drop in the stock.
2) Boris told to ‘go into battle’ for the City after Brussels power grab: Boris Johnson’s former economics adviser warned that the City of London is up against “an aggressive EU and intense global competition”.
3) UK shipyards to lose out on £1.5bn Navy contract, unions fear: Building a new generation of supply ships to sail with aircraft carriers is vital to retaining skills in the UK, according to union leaders.
4) Bring Tesla to Teesside, Ben Houchen tells Elon Musk: Mr Houchen said on Twitter: “Hartlepool and the Tees Valley still stand ready to deliver a new Gigafactory – Just say the word.”
5) ‘Baffling’ travel advice forces easyJet to scale back schedule: Chief executive takes aim at government guidance where “green doesn’t mean green because you have restrictions and amber is sometimes red”.
What happened overnight
Asian markets fluctuated on Friday as investors battled to track a rally on Wall Street. In early Asian trade, Tokyo, Singapore, Wellington, Taipei and Jakarta were up, though Hong Kong, Shanghai, Sydney, Seoul and Manila dipped.
Coming up today
Corporate: Young & Co’s Brewery, Investec (Full year)
Economics: Retail sales (UK); flash PMIs (Asia, EU, UK, US); existing homes sales (US)