Market Update

Market Commentary July 2021

Posted: 29th July 2021   |   Share

By Sarah Ryman

Sarah Ryman

“People who work together will win, whether it be against complex football defences, or the problems of modern society,”

- Vince Lombardi

Global economies are recovering, holiday makers are taking advantage of travel restrictions easing, the first fully crewed space flight has taken place and the bright lights of a return to the new normal are becoming ever brighter.


GDP rose 0.8% in May which is the fourth consecutive month of growth according to the Office for National Statistics (ONS) thanks to an uptick in spending due to restrictions being lifted.  Consumer confidence has been boosted owing to the success of the vaccination programme and let us hope that this is only the beginning.  Whilst the health secretary Sajid Javid warned that we could see a rise to 100,000 cases a day in early July, scientists have been delighted to see a sharp fall in the number of people in the UK testing positive for Covid-19 over the last few days.  However shortages of workers and supply chain delays have hampered business activity – the IHS Markit / CIPS latest flash UK composite PMI fell to 57.7 in July from 62.2 in June. 

UK retail sales have had their best quarter on record according to the British Retail Consortium and KPMG.  Figures released this month showed that sales surged 10.4% in the second quarter of 2021 when compared to pre-pandemic figures for the same quarter in 2019 but in comparison to last year sales grew 28.4%!   The ONS showed retail sales rose 0.5% over the month.

Inflation has risen sharply in June to hit 2.5% which is the highest since August 2018 and puts pressure on the Bank of England to consider their next moves.                                                                                                                                          

The UK unemployment rate dropped by 0.2% to 4.8% between March and May as the UK continues to reopen but employment remains 206,000 lower than pre-pandemic levels. 


Business activity in the Eurozone expanded at its fastest rate for 15 years in June driven by both manufacturing and service sectors.  Figures released this month demonstrated expansion with a reading of 59.5 in June and Ireland registering the fastest growth. 

Brussels is paving the way for Europe to achieve net zero emissions to limit global warming with a strategy that targets all sectors of the economy and trade. 

The European Central Bank left rates at their all-time lows and reassured markets that they wouldn’t withdraw support too hastily or risk derailing the economic recovery.  Such comments (despite the rising inflation) seem to have left economists anticipating that interest rate rises are years away. 


Employment figures improved beyond economists’ expectations with 850,000 jobs being added last month according to non-farm payroll data.  A welcome sign as the economy continues to recover. 

Inflation here also increased more swiftly than analysts had anticipated with consumer prices jumping 5.4% year on year, as with the UK this will also likely challenge the Fed to consider whether high inflation is temporary or something that requires more proactive management sooner rather than later.  The Federal Reserve has highlighted that tapering of their bond purchases requires ‘further progress’ and additional improvements in the economy before they act.  The meeting this month took a step towards reduction of support for the US economy and the Federal Open Market Committee declared that it had made ‘progress’ towards its goals of 2% inflation and full employment targets but aren’t ready to act quite yet.  The question on everyone’s lips is when will they act...? Some are predicting as swiftly as later this year or early next – time will indeed tell.