The week ahead 01 July 2024 - UK GDP figures revised higher

What to watch out for in the UK economy and property market this week.

Confidence on the strength of the UK economy improved last week as the figures for Q1 GDP growth were revised upwards from 0.6% to 0.7%. This means the UK was the fastest growing economy in the G7 in the first quarter. Also, GDP per capita was upgraded from 0.4% to 0.5%, which points to improving productivity. The savings ratio increased from 10.4% in Q4 2023 to 11.2% in Q1 2024, which shows households remain cautious on spending for now. This is consistent with recent lacklustre retail sales data. However, that households have mounting excess savings at a time the economy is strengthening does improve the chances that consumer spending may improve in the coming months.

Turning to the ongoing debate surrounding home working, data showed a trial scheme to see if cutting fares on Fridays on the London Underground network boosts commuting only increased passenger numbers by 3% on an annual comparison. This has raised questions over whether such a small increase justified the cost of the scheme. It also demonstrates the popularity of homeworking on Friday in particular. Meanwhile, Avison Young analysis of MSCI data showed that over the last two years UK office rents have risen by around 4% though a period of economic slowdown, rising interest rates and even a recession. The equivalent time period during the Global Financial Crisis saw rents fall by nearly 13%. This suggests the office leasing market is holding up reasonably, despite both the transition to hybrid working and a difficult economic backdrop.

This week sees some important indicators released on the UK housing market. We believe the figures for house price growth and mortgage approvals should paint a moderately upbeat picture as we move into the busy season for home sales. In the Eurozone, data will be published on inflation and retail sales, which will probably demonstrate the bloc’s economy is cooling slightly.

Things to watch for this week

Monday, July 1st

Nationwide UK House Price Index, y-o-y, June

Previous: 1.3%
Forecast: 1.5%

As the economy strengthens and the housing market moves into the traditionally busy summer season, we are forecasting a small acceleration for house price growth.

UK Mortgage Approvals, May

Previous: 61.1k
Forecast: 61.3k

Mortgage approvals plateaued in recent months at just over 60,000 per month, and we are expecting a continuation of this trend. Pre-Covid approvals were typically between 60k and 70k per month.

Tuesday, July 2nd

Euro Area Inflation, June

Previous: 2.6%
Forecast: 2.5%

We are predicting falling food and energy prices to push down the index slightly, but ongoing strong services inflation will probably prevent a larger decline.

Friday, July 5th

Euro Area Retail Sales, m-o-m, May

Previous: -0.5%
Forecast: -0.3%

We believe a combination of high interest rates and uncertainty on the growth outlook probably kept shoppers in a frugal mood, resulting in another decline for retail sales in May.