To the victor belong the spoils. Whilst the England men’s football team were unable to deliver the European trophy supporters have so longed for, it is estimated that fans will have given more than a £3bn boost to the economy over the past four weeks, welcome news no doubt to the incoming Labour government. Alongside this, analysts at a number of investment banks have started to revise GDP expectations for this year, after data showed that the UK economy grew by 0.4% in May, double the expected forecast for the period. The country is currently enjoying its fastest rate of expansion in a couple of years. It seems likely that forecasts for 2024 will soon be revised upwards – good news again for a government that is looking to put growth at the heart of its agenda.
Improving growth can bring its own problems however, and when coupled with still stubbornly high service sector and wage inflation, there is the increasing possibility that policymakers at the Bank of England could yet be deterred from making the much-anticipated cut to interest rates at their meeting on 1st August. Investors will no doubt be closely following the inflation data released this morning as a result.
It is unlikely to all be plain sailing for the government however, as the trend towards working from home continues to weigh on productivity growth, and UK housebuilders warn that it will likely take at least a year to start increasing the housing supply, which could be a significant headwind for Labour’s mission to build 1.5mn new homes over the next five years.
We are now entering what is traditionally seen as the quieter summer period for markets, but with an interest rate decision looming and the ongoing political situation in the US, it seems there should still be enough to keep us all interested!
