The UK economy presented a mixed picture, with notable positives providing a cautiously optimistic outlook. UK inflation moved closer to the 2% target in April, decreasing to 2.3% from 3.2% in March, although services inflation remains persistent.
Consumer confidence improved in May, reaching its highest level since December 2021, reflecting strengthened consumer sentiment and optimism. This improvement is supported by resilient wage growth, with average earnings rising in real terms by 2.3% (including bonuses). Additionally, the housing market showed signs of recovery, with new mortgage commitments significantly increasing, indicating renewed activity.
Despite these encouraging trends, the UK economy faced challenges. GDP showed no growth in April, remaining flat after a 0.4% increase in March, largely attributed to adverse weather conditions. The labor market exhibited signs of strain, with unemployment rising to 4.4%, signaling weaknesses in job creation. Although the growth in mortgage arrears has slowed since the September 2022 Mini-Budget, arrears reached an eight-year high in Q1 2024, reflecting ongoing financial stress.
Overall, while challenges persist in economic growth and the labor market, positive trends in consumer confidence, wages, and housing market activity suggest a slowly improving economic landscape. However, upcoming elections add a layer of uncertainty, and close monitoring of global conditions remains essential.