Politics continued to garner headlines during June during the run-up to the General Election. Ahead of the election, however, the Institute for Fiscal Studies criticised the principal political parties for “ducking” key issues over tax and spending, and warned that the winning party will face an immediate “trilemma” of raising taxes, cutting spending, or increasing borrowing.
- Base rate remained unchanged at 5.25%
- The UK economy flatlined in April
- Consumer confidence continued to improve
An impending trilemma? Politics continued to garner headlines during June during the run-up to the General Election. Ahead of the election, however, the Institute for Fiscal Studies criticised the principal political parties for “ducking” key issues over tax and spending, and warned that the winning party will face an immediate “trilemma” of raising taxes, cutting spending, or increasing borrowing. The FTSE 100 Index fell by 1.3% during June, but rose by 5.6% over the first six months of the year. Meanwhile, the FTSE 250 Index fell by 2.1% over the month, but climbed by 3% during the first half of 2024.
“The UK’s rate of inflation achieved its 2% target for the first time since July 2021”
On-target inflation: the UK’s rate of inflation achieved its 2% target for the first time since July 2021 during May. The consumer price index rose at an annualised rate of 2% during the month, compared with April’s rate of 2.3%, although inflation in the services sector remained stubbornly high. The Bank of England held its key base rate at 5.25% , but the prospects of a cut appear to be growing, with several members of the Monetary Policy Committee either voting for a cut or admitting that their vote for no change had proved “finely balanced”.
Growth stagnates in April: the UK economy flatlined during April, dampened by the impact of rainy weather; however, the rate of growth in the first quarter was revised up from 0.6% to 0.7%, boosted by stronger activity in the services sector. The rate of unemployment rose to 4.4% over the three months to April, and the number of job vacancies continued to decline. Nevertheless, growth in average earnings remained relatively strong. Consumer confidence improved for a third consecutive month in June, according to GfK, and retail sales rose by 2.9% during May, lifted by increased footfall, improved weather and discounting.
FTSE reshuffle: cybersecurity company Darktrace, LondonMetric Property, and housebuilder Vistry were promoted to the FTSE 100 Index during June, replacing Ocado, RS Group, and St James’s Place, which moved to the mid-cap FTSE 250 Index.
ISAs drive growth in sales: net retail sales of UK-domiciled funds reached their highest level since August 2021 in April, according to the Investment Association . Sales totalled £2.8 billion during the month, fuelled by ISA subscriptions. The Global sector was the best-selling sector; in contrast, the UK All Companies sector suffered outflows of £997 million.
To view the series of market updates through June, click here
