The UK was placed on an election footing during May as Prime Minister Rishi Sunak announced a snap General Election. UK voters will head to the polls on 4 July. Although the announcement was unexpected, reaction from financial markets was comparatively muted.
- Annual inflation eased to 2.3%
- The UK economy exited its brief recession
- The BoE reiterated its focus on data
General Election on 4 July: the UK was placed on an election footing during May as Prime Minister Rishi Sunak announced a snap General Election . UK voters will head to the polls on 4 July. Although the announcement was unexpected, reaction from financial markets was comparatively muted. At present, polls indicate a clear win for Keir Starmer’s Labour Party. The FTSE 100 Index rose by 1.6% over the month, while the more domestically focused FTSE 250 Index climbed by 3.8%.
“The UK economy is set to experience a soft landing, according to the IMF”
A soft landing for the UK? The UK economy is set to experience a soft landing, according to the International Monetary Fund (IMF) , which raised its 2024 growth forecast to 0.7%. The IMF suggested that the BoE has scope for up to three rate cuts this year of 50 to 75 basis points each. In comparison, the Organisation for Economic Cooperation & Development (OECD) expects the “sluggish” UK economy to grow by 0.4% this year and 1% next year. The OECD predicted that UK interest rates will start to fall from the third quarter of this year, but will ease to 3.75% by the end of 2025.
Inflation moves closer to target: the rate of consumer price inflation fell from 3.2% year on year in March to 2.3% in April. Although it remained above the BoE’s 2% target – and did not dip as low as expected – it reached its lowest rate since July 2021. BoE Governor Andrew Bailey said that policymakers need to see more evidence of slowing inflation before they are prepared to start reducing rates. The British Retail Consortium (BRC) reported that food price inflation fell for a thirteenth consecutive month in May to 3.2% year on year, and that shop price inflation had returned to “normal levels”.
UK exits brief recession: the UK economy moved out of its brief recession during the first three months of 2024, posting quarterly growth of 0.6%. Elsewhere, the rate of unemployment rose to 4.3% during the first three months of the year, and the number of job vacancies continued to fall, while earnings growth remained strong at 6%. Consumer confidence in the UK rose in May, according to GfK’s Consumer Confidence Index . Although overall confidence remained in negative territory, GfK commented: “All in all, consumers are clearly sensing that conditions are improving”.
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