The week ahead 28 May 2024 - Election campaign begins with mixed data

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

CPI inflation for April fell to 2.3%, which was down from 3.2% in March but still above the Bank of England’s 2.0% target. The steep fall was viewed in Downing Street as a good enough backdrop to call a general election. However, mixed economic news came in the following days. The UK PMI composite business activity index declined from 54.1 in April to 52.8 in May. The convention of the index is that a figure of over 50 points to a growing economy, so while there was a slowdown, the PMI remained comfortably above 50. Also, retail sales volumes in April dropped by -2.3%, down from -0.2% in March, in part due to lower footfall in the face of bad weather. According to the Met Office, April saw 155% of the average rainfall. On a more encouraging note, UK consumer confidence improved with the GfK index rising from -19 in April to -17 in May.

The general election will have short-term implications for the commercial property market. Until the poll happens activity is likely to slow as some investors choose to pause, await the outcome, then hear and assess the contents of next the King’s Speech which is expected on 17th July. Late July and August are traditionally a quiet period in the commercial property market; so, adding the political uncertainty on to the holiday season, in our opinion it will be early to mid-September before the market gets back into its stride again. However, the plus side is the market will probably be returning from its summer holidays to find the political uncertainty lifted.

This week sees data released on the housing market. The recovery seen in late 2023 and early this year was driven by a fall in mortgage rates, but lately rates have been creeping upwards again. Consequently, we believe this week’s figures will show the market cooling slightly, but not to an extent that would cause concern. The housing market typically improves during the summer months, so going forwards we remain cautiously optimistic.

Things to watch for this week

Friday, May 31st

Mortgage Approvals, April

Previous: 61.3k
Forecast: 61.0k

Mortgage rates have increased in recent months, although the economy has also strengthened, so we are predicting a marginal decline in approvals.

Nationwide House Price Index, y-on-y, May

Previous: 0.6%
Forecast: 0.5%

We see higher mortgage rates further decelerating the annual growth rate, but with growth remaining in positive territory.