The week ahead 22 April 2024 - The UK unemployment rate increases
What to watch out for in the UK economy and property market this week.
Last week saw a rather mixed set of UK labour market and inflation statistics. Nominal pay growth remained unchanged at 5.6% in February, which was above the 5.5% economists predicted. However, the unemployment rate increased from 4.0% in January to 4.2% in February. Meanwhile, inflation fell from 3.4% in February to 3.2% in March, which was slightly above the consensus forecast of 3.1%, but nevertheless a decline. This increased financial markets speculation that the Bank of England might delay until September before cutting the base rate. However, the Bank of England Governor, Andrew Bailey, after the figures were released said the fall in inflation remains “on track”. Given missing a forecast by 0.1% is within the standard margin of error we feel the financial markets have overreacted, so we are standing by our forecast of a June base rate cut.
Certainly, the latest retail sales figures cast doubt on the idea Britain might be heading towards a US situation on growth and inflation. Sales volume flatlined in March due to weaker activity for department stores, food retailers and online. Department stores had a strong January and February, so March probably marked a pause for a breath after a generally good Q1 for the sub-sector. For food sales, we suspect high prices are now deterring shoppers and this could mean the discounters gain further market share as consumers continue to seek value for money. That change in consumer behaviour is a step towards future price cuts and will fuel disinflation.
This week sees ‘flash’ PMI business activity indices released for most of the major global economies. With inflation easing around the world, and little sign of an oil price spike despite events in the Middle East, we believe the indices will report continued recovery. Also, consumer sentiment figures will be published for the Eurozone where we are expecting further evidence of returning confidence.
Things to watch for this week
Monday, April 22nd
Euro Area ‘Flash’ Consumer Confidence, April
Previous: -14.9
Forecast: -14.3
Recent months have seen a steady improvement in consumer sentiment, reflecting decelerating inflation and low levels of unemployment. We are predicting another improvement for April.
Tuesday, April 23rd
UK ‘Flash’ Composite PMI, April
Previous: 52.8
Forecast: 52.9
With inflation easing and consumer confidence improving, we believe most businesses have seen improving trading conditions in April.
Wednesday, April 24th
Germany Ifo Business Climate, April
Previous: 87.8
Forecast: 88.8
Sentiment on the business climate in Germany strengthened in February and March. Given recent upbeat survey evidence, we are predicting another rise for the Ifo index.
