Last week got off to a positive start on the economic front with the headline rate of UK inflation dropping to 2.3% in April, a whisker above expectations and the Bank of England’s official 2% target.

The main driver of lower prices was the household energy cap, added to which goods price inflation turned negative – although food prices went up slightly – which should have set the scene for the Bank to provide more clarity on its plan for interest rates this year at its next meeting on 20 June.

However, the decision by the prime minister to call a July election prompted ‘The Old Lady of Threadneedle Street’ to say it wouldn’t make any comment on interest rates until after the election, so it seems safe to assume there will be no change to UK interest rates in the next month.

April’s UK retail sales figures were fairly miserable – down 2.7% by volume on April 2023 and 3.8% below their pre-pandemic level – but it’s unlikely anyone was surprised given the atrocious weather and the impact that had on footfall.

More encouraging was April’s GfK consumer confidence report, which showed a continued improvement in overall sentiment thanks to slowing inflation, lower energy bills and the recent round of national insurance cuts.

Looking ahead, US first-quarter GDP (gross domestic product) later today will be closely scrutinised, as will PCE (personal consumption expenditure) prices as they are key input for the Fed when it comes to the timing of rate cuts.

Next week sees the release of manufacturing PMI data in the US, the UK, Europe and China, which are all moving at different speeds, as well as services PMI data where it is a much more uniform picture with all zones in ‘expansion’ territory. 

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