ECONOMIC OUTLOOK
THE UK manufacturing sector showed signs of a slowdown on Monday after a strong first quarter, according to the Confederation of British Industry’s industrial trends survey.
Manufacturing growth eased to +4 in April from +8 in March and manufacturers said new orders were likely to grow more slowly in the short term because the slowdown in domestic demand would outweigh growth in exports.
The fall in the value of sterling has also seen costs rise at their fastest rate for six years. Investment plans were put on the backburner and hiring intentions were “muted.”
Going back to last Tuesday, we saw the announcement that the UK will have a general election on June 8. Following the Prime Minister’s announcement, the pound climbed above $1.28 to its highest level against the US dollar since December.
Analysts said the stronger pound reflected the likelihood that Theresa May will secure a bigger parliamentary majority, which should help as the UK negotiates its EU exit deal.
Meanwhile, the International Monetary Fund upgraded its UK growth forecast to 2% this year. Previously the IMF had forecast growth of 1.5% for 2017.
However, it warned there are still risks ahead, insisting the Brexit vote will reduce the UK’s economic growth in the longer term.
Looking worldwide, the IMF also raised concerns about the possibility of more protectionist trade policies and rising debt levels in China. China’s economy grew at annual rate of 6.9% in the first quarter of 2017, it was announced.
Business Secretary Greg Clark promised “muscular” action on household energy bills “very shortly”. Energy companies have been braced for Government intervention on household bills after a series of recent price rises which have been condemned by consumer groups and MPs.
New mortgage lending was 19% higher in March than in February, but 19% lower than March last year, according to the Council of Mortgage Lenders. The sharp year-on-year fall reflected the rush last spring to beat the increase in stamp duty on second properties.
Retail sales fell much more than expected in March as higher prices saw shoppers reduce their spending. The Office for National Statistics said shoppers bought 1.5% less than in February.
The monthly decline in retail sales volumes also means that, for the first time since the end of 2013, sales volumes fell compared with the previous quarter. This will drag down economic growth in the first quarter of 2017.
Separate ONS data showed that spending by foreign tourists visiting the UK was 6% higher in February than a year ago.
The figures indicate that the fall in the value of the pound is boosting the spending power of tourists visiting the UK even as it squeezes British consumers.