As prices continued their relentless rise, the IMF warned: “inflation has become a clear and present danger for many countries”. Consumer price inflation in the UK accelerated from 6.2% year on year in February to 7% in March to reach a fresh 30-year high.
- UK inflation rose to 7% YoY in March
- The IMF cut its 2022 growth forecast for the UK to 3.7%
- Sterling fell against the dollar to its lowest level since mid-2020
Inflationary pressures intensify: as prices continued their relentless rise, the International Monetary Fund (IMF) warned: “inflation has become a clear and present danger for many countries”. Consumer price inflation in the UK accelerated from 6.2% year on year in February to 7% in March, reaching a fresh 30-year high. Inflation has been stoked by surging energy prices and is expected to climb even higher following the increase in the energy price cap in April.
“UK consumer confidence deteriorated during April to a near-historic low”
Waning consumer confidence: according to GfK, UK consumer confidence deteriorated during April to a near-historic low. The Office for National Statistics (ONS) reported a monthly decline of 1.4% in retail sales during March. While the FTSE 250 Index fell by 2.1% during April, the FTSE 100 Index edged 0.4% higher over the month. Since the start of 2022, the blue-chip index has risen by 2.2% while mid-caps have fallen by 11.8%. Amid mounting uncertainty over the outlook for the UK economy, the pound fell to its lowest level against the US dollar since the middle of 2020.
Slower growth: the IMF cut its forecast for UK economic growth this year from 4.7% to 3.7%. From being the fastest-growing economy in the G7 during 2021, the UK is now expected to post the slowest growth in 2023 – downgraded from 2.3% to 1.2% - undermined by rising interest rates, slowing consumer spending, and the impact of Brexit. Having expanded at a monthly rate of 0.8% in January, the UK economy grew by only 0.1% in February, dampened by a contraction in manufacturing, although it remained 1.5% above its pre-pandemic level.
Optimism wanes among CFOs: a survey by consultants Deloitte showed that UK businesses are struggling to cope with rising cost pressures caused by geopolitics and surging inflation. 98% of UK chief financial officers expect operating costs to rise over the next year, while 71% anticipate a decline in operating margins.
Energy sector boosts Q1 dividends: although UK dividends fell by 24.9% on a headline basis during the first three months of 2022, this was attributable to one-off factors such as special dividend payouts and the departure of mining firm BHP from the London Stock Exchange. On an underlying basis, according to Link Group’s UK Dividend Monitor, dividends grew during the first quarter at a much healthier 12.2%, boosted by higher payments from the oil sector.
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