The week ahead 13 May 2024 - GDP growth beat forecasts in Q1
What to watch out for in the UK economy and property market this week.
The latest GDP figures confirmed the UK economy exited recession in Q1 2024, and did so at a faster pace of growth than the US and the Eurozone. First quarter GDP grew by 0.6%, quarter-on-quarter, exceeding the consensus forecast of 0.4%. The key Services sector expanded by 0.7%, with the strongest data coming from the Transport and Storage sub-sector, which is good news for logistics property. The second highest Services growth came from Professional Scientific and Technical, which bodes well for the outlook for offices and lab space. Activity picked up for manufacturing, particularly motor vehicle production. The Construction sector did see a contraction of -0.9%, but overall this was a robust set of GDP figures and will help to build confidence in the outlook for property markets.
The other major item of news for the economy last week was the Bank of England interest rate announcement. As was widely expected the Base Rate was left unchanged at 5.25%, although two Monetary Policy Committee (MPC) members voted for a rate cut, up from one in the previous meeting. Moreover, the forecasts released to accompany the rate announcement point to inflation coming under control over the next three years, a situation that could be used to justify a rate cut. The next set of inflation figures is to be released in late May, and we are predicting a sharp fall, possibly all the way to 2%, thus hitting the MPC’s target. This could support a decision to cut rates in June or July in our opinion. Our full analysis of the MPC decision can be found here.
This week sees the release of UK employment statistics, which we expect to show a continuation of the recent trend of moderate slowdown in the labour market. Also, two Bank of England rate setters, including the Bank’s Chief Economist, will give speeches this week, which may provide more insight into their thinking on how close we are to a rate cut.
Things to watch for this week
Tuesday, May 14th
UK HMRC Payrolls Growth, April
Previous: -67k
Forecast: -30k
Total payrolls contracted in February and March, reflecting a broader slowdown in the jobs market this year. We believe another decrease occurred in April as firms try to control costs.
Euro Area ZEW Economic Sentiment Index, May
Previous: 43.9
Forecast: 45.5
The index has been in positive territory for seven consecutive months and gained momentum in March and April. We are forecasting another increase for May.
