Economic Reviewof May 2024

Our monthly economic review is intended to provide background to recent developments in investment markets as well as to give an indication of how some key issues could impact in the future.

It is not intended that individual investment decisions should be taken based on this information; we are always ready to discuss your individual requirements. We hope you will find this review to be of interest.

UK growth rate at two-year high

Last month’s release of first-quarter gross domestic product (GDP) statistics confirmed the UK economy has now exited the shallow recession entered during the latter half of last year, while survey evidence suggests private sector output has continued to expand across the past two months.

The latest GDP data published by the Office for National Statistics (ONS) showed the UK economy grew by 0.6% during the January to March period. This figure was above all forecasts submitted to a Reuters poll of economists with the consensus prediction pointing to a 0.4% first quarter expansion and represents the fastest quarterly rate of growth since the final three months of 2021.

ONS said that growth was driven by broad-based strength across the services sector with retail, public transport and haulage, and health all performing well; car manufacturers also enjoyed a particularly good quarter, although construction activity remained weak. In addition, the statistics agency noted that the
first-quarter data was likely to have been boosted by Easter falling in March this year compared to April last year.

Data from the closely-watched S&P Global/CIPS UK Purchasing Managers’ Index (PMI) suggests the recovery has continued in the second quarter as well. While May’s monthly release did reveal that the preliminary composite headline Index fell to 52.8 from 54.1 in April, this latest reading was still above the 50 threshold that denotes growth in private sector activity.

Commenting on the findings, S&P Global Market Intelligence’s Chief Business Economist Chris Williamson said, “The flash PMI survey data for May signalled a further expansion of UK business activity, suggesting
the economy continues to recover from the mild recession seen late last year. The survey data are consistent with GDP rising by around 0.3% in the second quarter, with an encouraging revival of manufacturing accompanied by sustained, but slower, service sector growth.”