Report Excerpt
The prospects for faster economic growth in the near term have improved, and recovering household incomes following the high rates of inflation seen last year should help to bolster consumer spending over the coming quarters. The BRC Customer Sentiment Monitor for May suggests that most British shoppers feel the economy will get better and will likely continue to grow.
The fall in the Consumer Price Index was less than anticipated, though dropped to 2.3%, not too far from the target rate of inflation. Recent drops in inflation mean higher real wage growth, and tax cuts such as the one to national insurance imply better spending power for the working population, over the second half of this year. However, despite there now being deflation in goods, inflation in services remains elevated.
Oil prices have tailed off somewhat, but the general trend for commodity prices has been upward over the past few months. Fuel prices remain elevated, but other key inputs in food production such as natural gas have eased off considerably. Supply chain conditions nonetheless remain fragile and shipping operators are continuing to divert traffic away from the Red Sea, causing delays in shipping. Shipping costs have now surpassed their most recent peak, since the Israel-Hamas conflict began, adding further upside risks to other commodity prices.
Overview
- GDP grew in March by 0.4%, following upwardly revised growth of 0.2% in February. Services activity expanded by 0.5%, and the largest upward contributor was human health and social work activities. The biggest downward contributor was arts, entertainment and recreation. Consumer-facing services grew similarly, and retail trade provided the largest positive contribution. The biggest downward contributor was real estate activities.
- Inflation eased considerably in April and the Consumer Price Index lowered to 2.3%. Of the headline rate, 0.4% emanates from food, 0.9% from restaurants and hotels and 0.6% from recreation and culture. Housing and energy costs are now pushing down on inflation, shaving off 0.7% from the headline figure. Fuel prices rose for both petrol and diesel, with these figures registered when petrol was £1.48 per litre and diesel £1.57.
- The BRC-KPMG measure of retail sales fell by 2.7% in April (compared to the previous year), down from 4.3% growth in March.
- In the three months to March 2024, average regular pay (excluding bonuses) was estimated at £637 per week in nominal terms (not adjusted for inflation), higher than the estimate for a year earlier (£600 per week) and £483 per week in real terms (constant 2015 prices), higher than the estimate for a year earlier (£472 per week).