‘Noflation’ and wage growth keeps consumption moving

Economic Highlights

– The final estimate for UK GDP in Q1 2015 confirmed growth at 0.4%, an upward revision of 0.1 percentage points, resulting in an annual growth of 2.9%. The OBR expects output to expand in 2015 with real GDP growth of 2.4%.

– The rate of inflation (CPI) returns to ‘noflation’ with the annual rate of 0.0% recorded in June. Analysts expect the rate to remain very low at around 1% by the end of this year and the Bank Rate to remain at its current level until at least the Spring of 2016.

– The latest employment statistics for March to May 2015 compared to the three months to February 2015 show that employment was down by 67,000. There were also 15,000 more people unemployed than for the three months to February 2015. Average weekly earnings increased by 3.2% including bonuses, and 2.8% excluding bonuses, compared with a year earlier.

Sector Highlights

1. Industrial – the UK Manufacturing PMI for June was 51.4, marking a 26-month low. Nonetheless, this figure is still above the neutral 50.0 for the 27th consecutive month (Markit/CIPS).

2. Construction – the UK Construction PMI for June reported expansion of 58.1 from 55.9 in May. This is well above the long-run average of 54.6 and highlights the fastest increase in construction activity since February (Markit/CIPS).

3. Office – the UK Services PMI came in at 58.5 in June, higher than the five-month low of 56.5 in May. Q2 2015 was the strongest on average since Q3 2014 (Markit/CIPS).

4. Retail – the volume of retail sales in May increased 4.6% compared with May 2014, marking the 26th consecutive month of year-on-year growth (ONS).

5. Residential – UK house prices rose 1.0% in Q2 2015 and increased 4.1% on an annual basis. Greater London saw prices rise 2.3% over the quarter, with annual growth moderating to 7.3% (Nationwide HPI).

6. Debt – the Q2 2015 Credit Conditions Survey from the Bank of England reports that the availability of credit to the commercial real estate sector showed minimal improvement in Q2 2015, with a slight increase expected in Q3 2015. 

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