London's Economy Today - Issue 240 - August 2022

The overview

• Inflation rises strongly again
• Cost of living pressures deepen
• UK growth falls in the second quarter of 2022

Economic indicators

• The underlying trend in passenger journeys on London public transport remains upward with 218.4 million passenger journeys registered between 26 June 2022 and 23 July 2022, 9.1 million journeys more than in the previous period (29 May 2022 – 25 June 2022). In the latest period, 81.3 million of all journeys were underground journeys and 137.1 million were bus journeys.
• In July, the sentiment of London’s PMI business activity index decreased slightly but remained positive with the business activity PMI index for London private firms decreasing from 60.3 in June to 58 in July. The Purchasing Managers’ Index (PMI) survey shows the monthly business trends at private sector firms. Index readings above 50 suggest a month-on-month increase in activity on average across firms, while readings below 50 indicate a decrease.
• Consumer confidence in London remained negative in August with the consumer confidence index in London increasing slightly from -23 in July to -22 in August. The GfK index of consumer confidence reflects people’s views on their financial position and the general economy over the past year and in the next 12 months. A score above zero suggests positive opinions; a score below zero indicates negative sentiment.

London's Economy Today supplement: London macroeconomic scenarios (August 2022 update)

• Following last year’s rapid recovery, our reference scenario anticipates flatlining growth from the second half of this year and into 2023. Inflation at a 40-year high is squeezing real household incomes and consumer demand is likely to slow. Rising costs and a slowing demand outlook will also drag on businesses’ investment and hiring plans. As a result, we see activity contracting at some point in winter 2022-23, before growth picks up again in late 2023 and into 2024. Meanwhile jobs stagnate around the levels of early 2022 and even fall back modestly in early 2023. Employment then resumes a more normal pace of growth and pushes back above pre-pandemic levels in mid-2023.
• Customer-facing sectors are set for a stark challenge, while rising interest rates and slowing demand are also likely to drag on the housing market.
• Looking at the longer term, GLA Economics projects that real GVA levels will return to pre-crisis trends (the post-Brexit counterfactual) but that it may take a decade.
• The scenario results presented in this supplement come within a context of continuing unprecedented uncertainty. Overall, GLA Economics judges that risks are tilted to the downside, especially with the war in Ukraine potentially raising global commodity prices further, seeing consumer incomes face an increasingly sharp squeeze from rapid inflation.

London’s Economy Today data on the Datastore

• The main economic indicators for London are available to download from the Datastore.