Industry stalls, services resist
The May PMI flash estimate for services returns in expansion territory (50.2). However, the flash composite index remains below this threshold (49.4) due to a deterioration in industry (-0.3 points to 45.1). Industrial production fell by 0.7% m/m in April.
Consumer spending is picking up again
Retail sales rose more sharply in April (+1.3% m/m and 5.0% y/y), and the BRC index grew by 6.8% y/y in the same month. Household confidence recovered slightly (+3 points to -20) in May. However, the balance of opinion remains below its long-term average.
Fall in payroll employment
Payroll employment recorded a 3rd consecutive fall in April (-33,000). As a result, the unemployment rate, although still low, reached its highest point since the summer of 2021 (4.5% 3m/3m). However, regular wages are still rising at a very brisk pace, albeit at a lower rate than in the previous month (+5.0% y/y).
Inflation rose sharply in April to 3.5% y/y
This rebound was due to the introduction of a number of budgetary measures (increase in the rate of employers' national insurance contributions, excise duty on cars), as well as less deflation in energy prices. Household inflation expectations have risen ?(+4.2% over one year and 5-10 years).
Growth in Q1 surprised favourably at 0.7% q/q, supported by investment and net exports
We have revised down our forecast for ?Q2 (+ 0.1%) but raised Q3 2025 (+0.2%) to incorporate the effects of the trade agreement with the US. Growth will remain moderate in 2025, at 1.2%, before slowing again in 2026 to 1%.
