United Kingdom

Research evidence excerpt

United Kingdom

hree points to 52.1 in July, signal-

ling growth of closer to 1% annualized. Gfk consumer confi-

Announcements made this week included lower VAT on elec- dence leapt six points higher in July, while retail sales surged

tricity bills, a lower cap on bus fares and lower business rates another 1%. The data for August are likely to retrace some of

in parts of the hospitality sector. The cost of these is small at these gains, reflecting the fading of some temporary boosts

around £1.5bn, but to the extent the government wishes to (World Cup, weather) and a more complete reaction to the lat-

raise spending elsewhere, we expect that will mostly be met est rise in market energy prices. But the overall message is

by higher taxes this Autumn. one of growth resilience and perhaps upside risks to 2H26.

We see the new Labour leadership as open to an ‘alternation’ Figure 1: Composite PMI output prices

to the fiscal rules. Despite assurances from Burnham and the %bal, sa, horizontal line is 2018-19 average

Chancellor this week, the Prime Minister has already floated 70

the idea of searching for ‘flexibility’ in the rules. However, 65

this is dependent on the market environment, and the latest 60 UK

move up in market interest rates will serve to reduce appetite 55

for risk taking on the fiscal side. Ultimately, we do expect 50

Burnham to create more space to increase investment spend- EA

ing - which is more likely to be financed by borrowing - but

that may require waiting for a better time. 15 16 17 18 19 20 21 22 23 24 25 26

Source: S&P Global, J.P. Morgan

We expect no change in rates from the BoE next week. There

were no big surprises in the data this week to alter the BoE’s There was also better news in the pricing elements of the sur-

stance.