2015.06: June Economic Review

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By Paul Hyland - Chartered Wealth Manager
By Paul Hyland – Chartered Wealth Manager


  • The UK economy is expected to continue growing at a good pace
  • Business investment at 10 year high
  • Pay growth continues to outstrip inflation increasing real earnings
  • CPI falls below zero for first time in fifty-five years but a prolonged period of deflation is unlikely
  • Retail sales continue cycle of consecutive growth driven by sales in clothing, footwear and textiles

UK Economic Review

According to latest official estimates the UK economy grew by 2.4% in Q1 and so economic output is currently 4% above its pre-recession peak in Q1 2008. Growth is expected to continue at a good pace.

Business investment grew by 1.7% over the same period to £45.7 billion, which is the highest level since Q2 2005.

A rise in imports, fall in exports and a fall in the pound has weakened the UK’s net trade position causing a drag on economic growth in the first three months of 2015, knocking 0.9% off GDP growth. Analysts believe that this confirms rebalancing the UK economy remains a major challenge.

UK employment rose by 202,000 in Q1 2015 causing the unemployment rate to shift down to 5.5% over the period. Regular pay growth reached 2.2% in annual terms.  March was the sixth successive month that pay growth has outstripped inflation and means that earnings continue to grow in real terms.

CPI inflation fell from 0.0% to -0.1% in April, in negative territory for the first time since 1960. Downward pressure has come from air and sea fares following the decline in oil prices over the past year. As these declines will start to fall our of the CPI calculation, the rate is expected to pick up modestly.

Retail sales are up by 4.7% in annual terms and April represents the twenty-sixth consecutive month of growth, the longest sustained period since records began in June 1996. The British Chambers of Commerce believes this is an indication that the pace of UK growth is likely to accelerate in Q2 2015.

In its latest inflation report the Bank of England has downgraded their outlook for the UK economy, which it now expects to growth by 2.5% during 2015, against their previous estimate of 2.9%.

The Eurozone, the UK’s biggest trading partner, grew by 0.4% in Q1 2015 lead by Germany (0.3%) and Spain (0.9%), whilst Greece slipped back into recession. Despite improvements the Eurozone’s economic outlook remains weak.

Global Investment Outlook

US equities: hit a new high amongst a wave of consolidation across the microchip industry.

European equities: advanced in local currency terms with GDP figures indicating a continued expansion of the Eurozone economy. GDP growth in France and Italy was stronger than expected.

Asian equities: Japan delivered the fifth consecutive month of gains as China’s equity market pulled back following a recent rally.

Emerging Markets retreated following previous month gains and commodity prices fell amongst a strengthening dollar.

Fixed Interest: the global bond markets began to stabilise

The information in this email does not constitute advice or a recommendation and investment decisions should not be made on the basis of it.

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26 Jan 2024

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