Economic Review Archives

Economic review March 2025

Posted on 3 April 202524 April 2025 by Sarah O'Sullivan

Key takeaways

The Chancellor cut welfare and departmental spending to restore a fiscal buffer, but risks to forecasts remain high
Inflation dipped unexpectedly but is expected to rise again due to higher energy, taxes and wage costs
Business and retail activity showed resilience, but weak manufacturing and trade tensions cloud economic prospects

Chancellor trims spending plans

Rachel Reeves delivered her Spring Statement on 26 March, unveiling welfare cuts and spending reductions in order to balance the government’s books in the face of a worsening fiscal outlook.

The new spending plans were required to ensure the Chancellor stays on track to meet her two self-imposed fiscal rules, which she confirmed remain “non-negotiable.” An updated forecast produced by the Office for Budget Responsibility (OBR) had more than wiped out the Chancellor’s previous £9.9bn fiscal buffer announced in last October’s Budget due to a combination of higher debt interest costs and lower economic growth.

Several policy changes announced in the Spring Statement, including welfare reforms and day-to-day departmental spending reductions, restored the buffer back to its October level. The OBR did, however, note that its size remains historically low and that the buffer therefore provides only a small margin of error against the risk of future economic shocks.

Speaking after Ms Reeves delivered her statement, OBR Chair Richard Hughes also acknowledged the precarious nature of economic forecasting and admitted there were many factors that could once again “wipe out” the Chancellor’s fiscal headroom; these include an escalating trade war, a small downgrade to growth forecasts or a rise in interest rates.

This vulnerability was vividly highlighted just hours after the Chancellor finished her speech, with President Trump’s announcement of a new 25% tariff on cars and car parts coming into the US – a move which is widely expected to hit global growth prospects.

Analysis by the Institute for Fiscal Studies (IFS) also concluded that the Chancellor’s headroom is ‘very small.’ IFS Director Paul Johnson added there was a “good chance” economic forecasts would deteriorate significantly before the Autumn Budget which could leave the government facing months of damaging speculation about what taxes might need to be increased.

Inflation dips but fresh climb predicted

While the latest batch of inflation statistics did reveal a larger than expected monthly decline in the headline rate, economists continue to warn that price rises are likely to accelerate again soon.

Figures published last month by the Office for National Statistics (ONS) showed the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – dropped to 2.8% in February from 3.0% the previous month. This rate was just below economists’ expectations, with a Reuters poll predicting a reading of 2.9%.

ONS said February’s decline was primarily driven by lower clothing and footwear prices which fell for the first time in over three years, partly due to an unusually high number of sales during the month. This unseasonal clothes discounting offset small price increases from a number of other categories, including alcoholic drinks.

Despite the monthly dip, economists still expect a fresh pick-up in the CPI rate over the coming months. Indeed, a number of near-term price rises, such as energy, Council Tax and water bill increases, are already baked in, while surveys suggest many businesses will look to raise prices in response to April’s National Insurance and Living Wage increases.

Last month also saw interest rates remain on hold, following the latest meeting of the Bank of England’s interest-rate setting committee. At its 19 March meeting, the Bank’s nine-member Monetary Policy Committee (MPC) voted by an 8-1 majority to leave Bank Rate unchanged at 4.5%; the one dissenting voice preferred a 0.25 percentage point reduction.

Commenting after announcing the decision, Bank Governor Andrew Bailey said he still believed rates were on a “gradually declining path” but noted that increasing geopolitical and global trade uncertainties meant the Bank would have to be “careful” when considering future cuts. The next MPC announcement is scheduled for 8 May.

Markets

At the end of March, concerns weighed on financial markets, days before Donald Trump’s tariff plans are due to take effect. Investors are braced for a broad set of tariffs, set to be unveiled on April 2 – described as ‘Liberation Day’ by the President.

In the UK, the FTSE 100 index closed the month on 8,582.81, a loss of 2.58%. The mid-cap focused FTSE 250 closed the month down 4.19% on 19,475.48, while the FTSE AIM closed on 681.99, a loss of 3.10%.

Across the pond, the Dow closed March down 4.20% on 42,001.76, while the tech-orientated NASDAQ closed the month down 8.21% on 17,299.29. On the continent, the Euro Stoxx 50 closed March 3.94% lower on 5,248.39. In Japan, the Nikkei 225 ended the month on 35,617.56, a monthly loss of 4.14%.

On the foreign exchanges, the euro closed the month at €1.19 against sterling. The US dollar closed at $1.29 against sterling and at $1.08 against the euro.

Brent Crude closed March trading at around $74 a barrel, a monthly gain of just over 7.0%. Oil moved higher after Donald Trump suggested that the US could impose secondary tariffs on Russia, a major exporter. The OPEC+ producer’s crude exports hit a five-month high in March. Gold closed the month trading around $3,149 a troy ounce, a monthly gain of almost 10.00%. The gold price reached a trading high on 31 March as concerns intensified over an escalating trade war, prompting investors to flock to the safe-haven asset.

Index	Value (31/03/25)	Movement since 28/02/25
FTSE 100	8,582.81	-2.58%
FTSE 250	19,475.48	-4.19%
FTSE AIM	681.99	-3.10%
Euro Stoxx 50	5,248.39	-3.94%
NASDAQ Composite	17,299.29	-8.21%
Dow Jones	42,001.76	-4.20%
Nikkei 225	35,617.56	-4.14%

Survey reports uptick in business activity

Although the latest monthly economic growth statistics did reveal an unexpected contraction at the start of the year, more recent survey evidence points to a “modest expansion” in March.

Figures published last month by ONS showed the UK economy shrank by 0.1% in January, driven by a sharp decline in manufacturing output; in contrast, a Reuters poll had predicted a monthly growth rate of 0.1%, following December’s 0.4% expansion. While ONS said the economy was still estimated to have grown by 0.2% across the three months to January, it also noted the overall picture was one of ‘weak growth.’

Data from the recently released S&P Global/CIPS UK Purchasing Managers’ Index (PMI) does point to a subsequent pick-up in activity, with March’s preliminary headline growth indicator hitting a six-month high of 52.0. This upturn, though, was driven by only small pockets of growth, most notably in financial services, with manufacturers continuing to struggle.

S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The signal from the flash PMI is an economy eking out a modest expansion in March, consistent with quarterly GDP growth of just 0.1%. However, just as one swallow does not a summer make, one good PMI doesn’t signal a recovery.”

Retail sales unexpectedly rise

The latest official retail sales statistics showed that sales volumes defied analysts’ expectations by rising in February, while survey evidence points to a continuing modest pick-up in consumer sentiment.

Figures released last month by ONS revealed that retail sales volumes grew by 1.0% in February, with broad-based strength reported across all major categories except food stores sales. This loosening of consumer purse-strings came as a surprise to most analysts, with a Reuters poll of economists actually predicting a 0.4% monthly contraction.

Data from GfK’s most recent consumer confidence survey also reported further modest improvement in the overall level of consumer sentiment. While March’s headline figure remained below the survey’s long-run average of -10, consumer morale was buoyed by greater optimism in economic prospects and ticked up to a three-month high of -19.

Evidence from the latest CBI Distributive Trades Survey, however, shows the retail environment remains challenging. According to the survey, annual sales volumes fell ‘markedly’ in March with retailers predicting a further decline, albeit at a slower pace, in April too. Firms across the retail and wholesale sectors suggested ‘global trade tensions,’ as well as last Autumn’s Budget decisions, were weighing on confidence and leading to a reduction in demand.

All details are correct at the time of writing (01 April 2025)

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

This material is intended to be for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Tees is a trading name of Tees Financial Limited which is regulated and authorised by the Financial Conduct Authority—registered number 211314.

Tees Financial Limited is registered in England and Wales—registered number 4342506.

Economic Review February 2025

Posted on 3 March 202528 March 2025 by Sophie Soraf

Key takeaways:

UK economic output unexpectedly rose by 0.1% in the fourth quarter of 2024
Bank of England will be ‘careful’ about reducing Bank Rate due to a spike in inflation
Retail sales volumes rose by 1.7% in January, bouncing back from December’s 0.6% decline

Growth stronger than expected in late 2024

Data released last month by the Office for National Statistics (ONS) revealed that the UK economy unexpectedly grew in the final three months of last year, although more recent survey evidence still points to a sluggish outlook.

The latest gross domestic product (GDP) statistics showed that economic output rose by 0.1% in the fourth quarter of 2024, after flatlining across the previous three-month period. While the figure still only represents a relatively lacklustre rate of expansion, it was significantly stronger than economists had been expecting, with the consensus forecast in a Reuters poll predicting a 0.1% contraction during the final three months of the year.

A monthly breakdown showed that the final quarter GDP figure was lifted by a strong performance in December, which saw a 0.4% expansion. This reflected robust service sector growth, with ONS noting that wholesalers, film distributors, pubs and bars all did particularly well, while machinery manufacturers and pharmaceutical companies performed strongly too. In addition, however, it was noted that December’s growth relied on government spending and a potentially temporary build-up in firms’ inventories.

Data from a recently released economic survey also suggests growth in the first two months of 2025 has been tepid. February’s flash headline growth indicator from the S&P Global/CIPS UK Purchasing Managers’ Index (PMI) dipped to 50.5 from 50.6 in January, leaving the index only marginally above the 50.0 no change threshold, implying the UK economy has seen little growth so far this year.

S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “Early PMI survey data for February indicate that business activity remained largely stalled. While marginal output growth was eked out in February, order books deteriorated at a rate not seen since August 2023 to hint at likely cuts to business activity in the coming months unless demand revives.”

Interest rates cut; inflation jumps

Last month, the Bank of England (BoE) sanctioned a further cut in interest rates but said it would be ‘careful’ about future reductions in the face of an expected spike in inflation and global uncertainty.

Following its latest meeting, which concluded on 5 February, the BoE’s nine-member Monetary Policy Committee (MPC) voted by a 7-2 majority to reduce rates by 0.25 percentage points, taking Bank Rate down to 4.5%. The two dissenting voices both voted for a larger cut of 0.5 percentage points.

Alongside the rate announcement, the Bank unveiled its latest economic projections, which included a halving of its 2025 growth forecast to 0.75%. The updated outlook also predicts inflation will rise to nearly double the Bank’s 2% target level, peaking at 3.7% in the third quarter of this year and not return to target until the end of 2027.

Commenting after announcing the MPC’s decision, BoE Governor Andrew Bailey reaffirmed his expectation that rates would continue on a downward trajectory, but added “We will have to judge meeting by meeting, how far and how fast.” Mr Bailey also stressed the need to remain “gradual and careful” when reducing rates further because “we live in an uncertain world and the road ahead will have bumps on it.”

This bumpy road was vividly highlighted two weeks later when the official inflation statistics were published, with the annual headline rate jumping to 3.0% in January from 2.5% in December. ONS said this higher-than-expected increase was driven by rising food prices, a smaller-than-usual drop in air fares and an increase in private school fees.

January’s data leaves inflation at a 10-month high with analysts predicting further rises to come. April in particular is likely to see a notable jump, with energy, water and council tax bills all set to rise during that month.

Markets

At the end of February, global markets remained under pressure as investors reacted to economic uncertainty, with Trump’s trade policies continuing to weigh on sentiment.

US stocks fell after the Trump-Zelensky Oval Office exchange on Friday 28 February, before moving higher in the afternoon session. The Dow closed February 1.58% lower on 43,840.91, while the tech-orientated NASDAQ closed February down 3.97% on 18,847.28.

In the UK, the internationally focused blue-chip FTSE 100 index closed the month on 8,809.74, a gain of 1.57%. At month end the index rose as hopes increased of a potential trade deal between the UK and the US, following a week of crunch talks in Washington. The mid-cap focused FTSE 250 closed February down 2.98% on 20,326.38, while the FTSE AIM closed on 703.83, a loss of 1.99%.

On the continent, the Euro Stoxx 50 closed February 3.46% higher on 5,463.54. In Japan, the Nikkei 225 ended February on 37,155.50, a monthly loss of 6.11%.

On the foreign exchanges, the euro closed the month at €1.21 against sterling. The US dollar closed at $1.25 against sterling and at $1.03 against the euro.

Gold closed February trading around $2,863 a troy ounce, a small monthly gain of 0.44%. At month end, the gold price fell as concerns escalated over Trump’s sweeping tariff strategy and a stronger dollar put pressure on the precious metal. Brent Crude closed the month trading at around $69.91 a barrel, a monthly loss of just over 4.0%, as concerns about the risks posed by tariffs to the global economy and demand for fuel weigh on sentiment.

Index	Value (28/02/205)	Movement since 31/01/25
FTSE 100	8,809.74	+1.57%
FTSE 250	20,326.38	-2.98%
FTSE AIM	703.83	-1.99%
Euro Stoxx 50	5,463.54	+3.46%
NASDAQ Composite	18,847.28	-3.97%
Dow Jones	43,840.91	-1.58%
Nikkei 225	37,155.50	-6.11%

Pay growth accelerates; vacancies still falling

The latest batch of labour market statistics showed that UK wage growth remained strong in late 2024, while surveys suggest companies are planning to cut jobs or recruit fewer people over the coming months.

Figures published by ONS last month showed that average weekly earnings excluding bonuses rose at an annual rate of 5.9% across the final quarter of last year. This figure was up from 5.6% in the previous three-month period and represents the strongest reading since the three months to April 2024.

The data release also revealed yet another decline in the overall number of job vacancies. In total, ONS said there were 9,000 fewer vacancies reported between November and January 2025, the 31st consecutive monthly fall. And survey evidence suggests this decline is likely to continue as firms look to cut headcounts and freeze hiring as a result of higher employment costs associated with changes announced in the Autumn Budget.

A Chartered Institute of Personnel and Development survey released last month, for instance, found that around one in three firms are planning to reduce their headcount through redundancies or by recruiting fewer workers ahead of April’s National Insurance contributions hike and the uplift in the minimum wage.

Retail sales grew strongly in January

Official retail sales statistics released last month showed that sales volumes rebounded sharply in the first month of this year, while survey evidence points to a modest pick-up in consumer sentiment during February.

According to the latest ONS data, retail sales volumes rose by 1.7% in January, a strong bounce back from December’s 0.6% decline. The figure was also higher than all estimates submitted to a Reuters poll of economists which had pointed to growth of just 0.3%. ONS did, however, note that the increase was largely due to strong food sales, with other sectors, such as clothing and household goods, recording a more ‘lacklustre’ performance.

Encouragingly for the retail sector, data from GfK’s most recent consumer confidence index also reported a modest improvement in consumer sentiment. Overall, February’s headline confidence figure rose to -20 from -22 the previous month, with all five of the survey’s components improving, led by a four-point gain in personal finance expectations.

Evidence from the latest CBI Distributive Trades Survey, though, found that retailers remain ‘downbeat’ about their future business situation, with the data pointing to a sharp sales downturn in March, partly due to the later timing of Easter compared to last year.

All details are correct at the time of writing (03 March 2025)

Tees Financial Limited is registered in England and Wales—registered number 4342506.

UK economic growth forecast upgraded

Posted on 3 October 202428 March 2025 by Sophie Soraf

Economic review September 2024

On markets at the end of September, with investors and traders closely monitoring regional developments.

At month end, stocks retreated following implications from Federal Reserve Chairman Jerome Powell that further interest rate cuts are likely to occur at a more measured pace.

Across the pond, the Dow Jones closed the month up 1.85% on 42,330.15. The tech-orientated NASDAQ closed the month up 2.68% on 18,189.17.

On home shores, the FTSE 100 index closed the month on 8,236.95, a loss of 1.67%, while the FTSE 250 closed the month 0.16% lower on 21,053.19. The FTSE AIM closed on 740.43, a loss of 4.15% in the month. The Euro Stoxx 50 closed the month on 5,000.45, up 0.86%. In Japan, the Nikkei 225 closed September on 37,919.55, a monthly loss of 1.88%.

On the foreign exchanges, the euro closed the month at €1.20 against sterling. The US dollar closed at $1.33 against sterling and at $1.11 against the euro.

Brent crude closed September trading at $71.65 a barrel, a loss over the month of 6.74%. The conflict in the Middle East is causing some price volatility. OPEC+ plans to begin increasing production in December is pressurising prices, while weak demand in China also weighs. Gold closed the month trading at $2,629.95 a troy ounce, a monthly gain of 4.64%. Prices retreated at month end, reversing recent strong gains as increased safe-haven demand prompted a rally in the precious metal.

Index	Value (30/09/24)	Movement since 30/08/24
FTSE 100	8,236.95	-1.67%
FTSE 250	21,053.19	-0.16%
FTSE AIM	740.43	-4.15%
Euro Stoxx 50	5,000.45	+0.86%
NASDAQ Composite	18,189.17	+2.68%
Dow Jones	42,330.15	+1.85%
Nikkei 225	37,919.55	-1.88%

Retail sales stronger than expected

The latest official retail sales statistics revealed a healthy growth in sales volumes during August, while more recent survey data points to further modest improvement both last month and in October.

Figures released by ONS showed that total retail sales volumes rose by 1.0% in August, following upwardly revised monthly growth of 0.7% in July. ONS reported that August’s rise, which was higher than economists had predicted, was boosted by warmer weather and end-of-season sales.

Evidence from last month’s CBI Distributive Trades Survey also suggests retailers expect the summer sales improvement to have continued into the autumn period, with its annual retail sales gauge rising to +4 in September from -27 in August. In addition, retailers’ expectations for sales in the month ahead (October) rose to +5; this represents the strongest response to this question since April 2023.

CBI Principal Economist Martin Sartorius said retailers would “welcome” the modest sales growth reported in the latest survey. He also added a note of caution saying, “While some firms within the retail sector are beginning to see tailwinds from rising household incomes, others report that consumer spending habits are still being affected by the increase in prices over the last few years.”

National debt looks set to soar

Analysis published last month by the Office for Budget Responsibility (OBR) suggests national debt could triple over the coming decades if future governments take no action.

In its latest Fiscal Risks and Sustainability Report, the OBR said debt is currently on course to rise from almost 100% of annual GDP to 274% of GDP over the next 50 years due to pressures including an ageing population, climate change and geopolitical risks. It also warned that, without any change in policy or a return to post-war productivity levels, the public finances were unsustainable over the long term, and that ‘something’s got to give.’

The OBR is also tasked with producing a more detailed five-year outlook for the country’s finances that will be published alongside Chancellor Rachel Reeves’ first Budget, due to be delivered on 30 October. The Chancellor has previously warned the Budget will involve “difficult decisions” on tax, spending and welfare.

Data released last month by ONS showed that government borrowing in August totalled £13.7bn, the highest figure for that month since 2021. This took borrowing in the first five months of the financial year to £64.1bn, £6bn higher than the OBR forecast at the last Budget.

All details are correct at the time of writing (1 October 2024)

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. No part of this document may be reproduced in any manner without prior permission.

This material is intended for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Tees is a trading name of Tees Financial Limited, which is regulated and authorised by the Financial Conduct Authority. Registered number 211314.

Tees Financial Limited is registered in England and Wales. Registered number 4342506.

Bank of England hints at imminent rate cuts amid economic shifts

Posted on 9 July 202428 March 2025 by Sophie Soraf

Economic Review June 2024 – the prospect of a rate cut moves closer

While last month once again saw the Bank of England (BoE) leave interest rates unchanged at a 16-year high, the minutes of the Bank’s Monetary Policy Committee (MPC) meeting signalled a notable change in tone. Economists now view a rate cut as the most likely outcome when the MPC next convenes.

At its latest meeting, which concluded on 19 June, the MPC voted by a 7–2 majority to maintain the Bank Rate at 5.25%. For the second month running, the two dissenting voices called for an immediate quarter-point reduction, while, for the first time, some other members described their thinking as being “finely balanced.”

The meeting minutes also highlighted this potentially significant shift in stance, noting that the MPC will now examine whether ‘the risks from inflation persistence are receding.’ The minutes concluded, ‘On that basis, the Committee will keep under review for how long Bank Rate should be maintained at its current level.’

Last month’s inflation statistics published by the Office for National Statistics (ONS) before the MPC announcement revealed that the headline rate has returned to its 2% target level for the first time in almost three years. In a statement released alongside the MPC decision, BoE Governor Andrew Bailey described that as “good news.” He also said that policymakers need to be sure inflation will remain low and added, “that’s why we’ve decided to hold rates for now.”

July’s release of economic data, particularly in relation to wage growth and services inflation, is likely to prove pivotal to the next MPC decision, which is due to be announced on 1 August. A recent Reuters survey, however, found that most economists now expect an imminent cut, with all but two of the 65 polled predicting an August rate reduction.

Survey data signals a slowing pace of growth

Official data published last month revealed that the UK economy failed to grow in April, while survey evidence points to a more recent slowdown in private sector output due to rising uncertainty in the run-up to the General Election.

The latest monthly economic growth statistics released by ONS showed the UK economy flatlined in April, as most economists had predicted. Some sectors did report growth; services output, for instance, was up by 0.2%, a fourth consecutive monthly rise, with both the information and technology and the professional and scientific industries reporting rapid expansion across the month.

Other sectors, however, contracted, with ONS saying some were hit by April’s particularly wet weather. A number of retail businesses, for example, told the statistics agency that above-average rainfall had dented their trade during the month. Activity across the construction industries was also believed to have been impacted by the wetter weather.

More recent survey data also suggests private sector output is now growing at its slowest rate since the economy was in recession last year. Preliminary data from the S&P Global/CIPS UK Purchasing Managers’ Index (PMI) revealed that its headline economic growth indicator fell to 51.7 in June from 53.0 in May, a larger decline than analysts had been expecting. While the latest figure does remain above the 50 threshold, denoting growth in private sector output, it was the indicator’s lowest reading since November 2023.

Regarding the data, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “Flash PMI survey data for June signalled a slowing in the pace of economic growth. The slowdown, in part, reflects uncertainty around the business environment in the lead-up to the General Election, with many firms seeing a hiatus in decision-making pending clarity on various policies.”

Markets (Data compiled by TOMD)

As June drew close, global indices were mixed as a raft of economic data was released. Stronger-than-expected GDP data in the UK at month end fuelled speculation over the timing of interest rate cuts, while in the US, the latest inflation reading boosted market sentiment, and unemployment data came in below estimates.

Although the FTSE 100 registered its first monthly decline in four months, the upward revision to Q1 GDP on 28 June supported sentiment around UK-focused equities at month’s end. The main UK index closed June at 8,164.12, a loss of 1.34% during the month, while the FTSE 250 closed the month 2.14% lower at 20,286.03. The FTSE AIM closed at 764.38, a loss of 5.14% in the month. The Euro Stoxx 50 closed June on 4,894.02, down 1.80%. In Japan, the Nikkei 225 closed the month at 39,583.08, a monthly gain of 2.85%. Meanwhile, in the US, the Dow closed the month up 1.12% at 39,118.86, and the NASDAQ closed June up 5.96% at 17,732.60.

On the foreign exchanges, the euro closed the month at €1.17 against sterling. The US dollar closed at $1.26 against sterling and at $1.07 against the euro.

Gold closed June trading at around $2,330.90 a troy ounce, a monthly loss of 0.74%. Brent crude closed the month trading at $84.78 a barrel, a gain of 4.18%. The price rose during the month as indicators suggested an expanded military conflict in the Middle East, which could further disrupt the production of OPEC+ member Iran.

Index	Value (28/06/2024)	Movement since 31/05/024
FTSE 100	8,164.12	-1.34%
FTSE 250	20,286.03	-2.14%
FTSE AIM	764.38	-5.14%
Euro Stoxx 50	4,894.02	-1.80%
NASDAQ Composite	17,732.60	+5.96%
Dow Jones	39,118.86	+1.12%
Nikkei	39,583.08	+2.85%

Retail sales rebound strongly in May

The latest official retail sales statistics revealed strong growth in sales volumes during May after heavy rain dampened activity in the previous month, although more recent survey data does suggest the retail environment remains challenging.

ONS data published last month showed that total retail sales volumes rose by 2.9% in May, a strong bounce back from April’s 1.8% decline. ONS said sales volumes increased across most sectors, with clothing retailers and furniture stores enjoying a particularly strong rebound from the previous month’s weather-impacted figures.

Evidence from the latest CBI Distributive Trades Survey, however, suggests May’s recovery has proved to be short-lived. Its headline measure of sales volumes in the year to June fell to -24% from +8% the previous month. While the CBI did note that unseasonably cold weather may have impacted June’s figures, the data certainly suggests that retailers still face a tough trading environment.

CBI Interim Deputy Chief Economist Alpesh Paleja said, “Consumer fundamentals are improving, with inflation now at the Bank of England’s 2% target and real incomes rising. But it’s clear that households are still struggling with the legacies of the cost-of-living crisis, with the level of prices still historically high in some areas.”

Financial challenges await the new government

Data released by ONS last month showed that UK public sector debt is now at its highest level for over 60 years, while the Institute for Fiscal Studies (IFS) has warned that the next government will face a fiscal ‘trilemma.’

The latest public sector finance statistics revealed that government borrowing totalled £15bn in May, the third highest amount ever recorded for that month. Although the figure was £800m higher than May last year, it did come in below analysts’ expectations and was £600m less than the Office for Budget Responsibility had predicted in its latest forecast.

Despite this, the data also showed that public sector net debt as a percentage of economic output has now risen to 99.8%. This was up 3.7 percentage points from last May’s figure, leaving this measure of debt at its highest level since 1961.

Analysis by the IFS has also highlighted the scale of the financial challenge awaiting whichever party wins the forthcoming General Election. The IFS said that, unless economic growth is stronger than expected, the incoming government will face a ‘trilemma,’ either having to raise taxes more than their manifestos imply, implement cuts to some areas of public spending or allow the national debt to continue rising.

All details are correct at the time of writing (1 July 2024)

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice, and the accuracy and completeness of the information cannot be guaranteed. It does not provide individually tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of and reliefs from taxation are currently applied or proposed and are subject to change; their value depends on the investor’s individual circumstances. No part of this document may be reproduced without prior permission.

This material is intended for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Tees is a trading name of Tees Financial Limited, regulated and authorised by the Financial Conduct Authority and registered number 211314.

Tees Financial Limited is registered in England and Wales and registered number 4342506.

Key takeaways

Chancellor trims spending plans

Inflation dips but fresh climb predicted

Markets

Index

Value (31/03/25)

Movement since 28/02/25

Survey reports uptick in business activity

Retail sales unexpectedly rise

Key takeaways:

Growth stronger than expected in late 2024

Interest rates cut; inflation jumps

Markets

Index

Value (28/02/205)

Movement since 31/01/25

Pay growth accelerates; vacancies still falling

Retail sales grew strongly in January

Economic review September 2024

Index

Value (30/09/24)

Movement since 30/08/24

Retail sales stronger than expected

National debt looks set to soar

Economic Review June 2024 – the prospect of a rate cut moves closer

Survey data signals a slowing pace of growth

Markets (Data compiled by TOMD)

Index

Value (28/06/2024)

Movement since 31/05/024

Retail sales rebound strongly in May

Financial challenges await the new government