Britain’s economy was supposed to be the battleground for this election and Friday saw another chunk of official updates.
All pointed to some improvement but without delivering the knock-out punch Rish Sunak must have been hoping when he called the poll.
Economists said the data underlines that whoever wins has some tricky decisions ahead.
Spending and confidence rising
Consumer spending has remained robust despite inflation, with a 2.9% increase in retail sales in May offsetting a slump in April.
GfK’s Consumer Confidence Index recorded its third consecutive increase since March, reflecting improved economic optimism among surveyed Britons.
Retail sales. too. seem healthy as volumes jumped by 2.9% in May 2024, recovering from a 1.8% fall in April, the Office for National Statistics (ONS) reported.
This increase surpassed a 1.5% rise forecast by City economists and represents the fastest growth since January.
It was helped by a 5.4% rally in clothing sales with significant growth recorded by non-store retailers, such as online shops, where volumes surged by 5.9%.
GDP limps along
That strength belies the latest overall GDP numbers, which showed no growth in April due to wet weather, again according to the ONS.
The stagnation, which matched economist projections, followed a 0.4% increase in March.
This growth contributed to a 0.6% rise in UK gross domestic product (GDP) over the first quarter, with the ONS set to reveal confirmed data next Friday.
Strength in retail, transport, and haulage sectors supported this growth, despite some weakness in construction.
PMI numbers today confirmed this anaemic health as Britain’s service sector growth slowed to a seven-month low in June, impacting overall private sector growth, according to data provider S&P Global.
The slowdown was influenced by election-related uncertainties following Rishi Sunak’s general election call, causing a pause in client spending decisions.
Flash UK PMI composite figures fell to 51.7 in June from 53.0 in May, marking the lowest level since last November.
Borrowings rising
Borrowing figures showed UK state debt increased to its highest level since 1961 with public sector net debt now at 99.8% of GDP for the month.
Higher borrowing costs have strained the Treasury, despite less borrowing than predicted in May.
Economists caution that maintaining departmental budgets will become more expensive due to high borrowing costs and labour inflation.
Inflation heading down
Inflation has slowed to 2% in May, the lowest level since July 2021, aligning with the Bank of England’s target rate.
The Bank of England stated: “Inflation is expected to tick slightly higher again in the coming months but will stabilise near to the target rate.”
Base rates, which influence borrowing costs, are at a 16-year-high of 5.25% and the Bank of England chose not to reduce them yesterday.
Interest rates, which were low following the 2008 financial crisis, increased sharply over the past two years to curb spending demand amid rampant inflation pushing up mortgage and rental costs for many UK households.
The Bank of England hinted at possible reductions in August due to the slowdown in inflation.
Jobs steady
The UK unemployment rate rose to 4.4% in the three months to April, the highest in over two years.
Job vacancies also dropped, raising concerns about job market weakness.
However, regular earnings growth remained at 6% in the same period, outpacing price rises, which might explain the decent retail sales and confidence numbers.