UK Economic Update – 12 April 2015

UK inflation data in focus, average earnings and unemployment figures due at the close of the week

In what was a quiet spot for economic data the UK last week, the Markit Services PMI rebounded to its highest level since September 2014 (58.9), while manufacturing production growth came in as expected for the month of February at 0.4%.

While this did little to discourage the view that the pace of growth within the UK economy probably slowed during the first quarter, it does provide us with an indication that we have probably seen most of the pre-election slowdown that we are likely to see.

Looking ahead, average earnings and unemployment figures for March will be released on Friday. This is likely to mark the fifth consecutive month where wage growth has outstripped inflation, which is positive for those hoping to see interest rates rise sooner rather than later.

Although, the key event for the current week will be the release of inflation figures for March, which are scheduled for Tuesday. In the previous month inflation fell to 0.0%, which means that if it fell again in March then the UK would technically be in “deflationary” territory.

We are sceptical of whether this will actually happen as oil prices have held steady throughout March and April, while UK inflation numbers are yet to experience the consequent rebound observed in US and European CPI measures.  

Therefore, we are hopeful that headlines of deflation and pending doom will be avoided this time around.

Looking further out we continue to expect that the core event commanding the attention of investors will be the general election as the first week of May approaches.

This is as the fortunes of investors could be wildly divergent under different potential governments, with a Labour Party majority a distinct or costly negative and a Tory majority representing a reprieve from execution.

FTSE 100 / Q1 2015



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