Concerns over the possible measures contained in the new Labour Government’s Autumn Budget – which is scheduled to take place on 30 October – undermined sentiment in the UK during September, with investors, consumers and businesses all showing signs of unease.
- The BoE left interest rates unchanged
- Inflationary pressures are expected to pick up
- The OECD upgraded its UK growth forecasts
Politics hit sentiment: concerns over the possible measures contained in the new Labour Government’s Autumn Budget – which is scheduled to take place on 30 October – undermined sentiment in the UK during September, with investors, consumers and businesses all showing signs of unease. In particular, the British Retail Consortium warned that UK consumer sentiment had deteriorated, commenting: “Negative publicity surrounding the state of the UK’s finances appears to have damaged confidence in the economic outlook, particularly among older generations.” Over September as a whole, the FTSE 100 Index fell by 1.7% while the FTSE 250 Index edged 0.2% lower.
“Negative publicity surrounding the state of the UK’s finances appears to have damaged confidence” (BRC)
Inflation set to pick up: as expected, the Bank of England (BoE) maintained its key base rate at 5% at the Monetary Policy Committee’s September meeting. Sterling strengthened following the central bank’s decision, reaching its highest level against the US dollar since early 2022. The annualised rate of consumer price inflation remained at 2.2% during August. Looking ahead, the British Chambers of Commerce (BCC) expects inflationary pressures to intensify over the rest of 2024, forcing the BoE to adopt a cautious approach and implement a series of rate cuts of 10 basis points each. The BCC warned that the UK economy is “unlikely to be heading into the fast lane any time soon.”
OECD upgrades its expectations for the UK: the Organisation for Economic Cooperation & Development (OECD) upgraded its forecast for UK economic growth from 0.7% to 1.1% this year, and from 0.25 to 1.2% next year. The OECD also expects inflationary pressures to pick up, predicting that the UK will see rates of 2.7% this year and 2.4% in 2025. Elsewhere, the ONS reported that the UK economy had expanded more slowly than first estimated during the second quarter of 2024, posting growth of 0.5% instead of 0.6%. Activity in the production and construction sectors proved weaker than initially calculated. The rate of unemployment fell from 4.2% to 4.1% over the three months to July, and average earnings (excluding bonuses) rose by 5.1% over the same period, reaching their lowest growth rate since the second quarter of 2022.
FTSE movers: in the quarterly review of FTSE UK index components, insurer Hiscox joined the FTSE 100 Index during the month, replacing Burberry Group. Among mid-caps, technology company Raspberry Pi was promoted to the FTSE 250 Index, displacing Diversified Energy Company.
To view the series of market updates through September, click here
