Economic Review – May 2017

The Governor of the Bank of England, Mark Carney, delivered his Q1 2017 Quarterly Inflation Report in mid-May, with several caveats as to the state of the UK economy. Whilst maintaining an overall positive stance regarding the growth in wages beyond 2017, he believes that they will only continue to rise if we see a “smooth” withdrawal from the European Union.

Further encouraging news on the state of the UK’s consumer economy came from the Office for National Statistics (ONS), as they reported retail sales rising faster than expected in April. They reported the volume of sales increased by 2.3% against the previous month, which represented a 4% rise from the same period last year.

The upcoming general election on June 8 continues to occupy the minds of investors. With headlines dominated by the tragic suicide bombing in Manchester, electioneering was put on hold as a result. The FTSE 100 enjoyed its best monthly increase this year, the UK blue chip index posting a monthly gain of 4.39% to close the month at 7,519.95, peaking on May 26 with a record high of 7,547.63.

The widely followed IHS Markit/CIPS UK Services Purchasing Managers Index (PMI), which tracks the services sector – accounting for over 75% of the country’s Gross Domestic Product (GDP) – rose at its fastest rate since December 2016.

In the latest unemployment figures for the UK, released this month by the Office for National Statistics (ONS) in their Labour Force Survey, unemployment fell to its lowest level for 42 years, as the overall unemployment rate in the UK, in the January to March period, fell to 4.6%, a reduction from the 5.1% recorded a year earlier. This figure is closely representing full employment.