Weekly Market Update – Week Ending 05/04/24

UK shop price inflation released this week provided an early indication of the direction of travel for the March inflation figure due to be released later this month.

Shop price inflation fell to its lowest figure since December 2021 to 1.3%, indicating that the huge price increases seen over the last 2 years may finally be coming to an end. Within the headline figure, food inflation remained above other categories at 3.7%. However, this was down from 5% in the previous month and was the lowest since April 2022.

UK house prices fell for the first time in 5 months in March, surprising economists with a 1% month on month fall. This equated to an annual rise of just 0.3% in the year, much lower than the expected 1.5%. Despite higher borrowing costs, mortgage approvals hit a 17-month high in February, reflecting improvements to the cost-of-living crisis.

Wages in the UK are predicted to rise by 4.7% in the next 12 months, according to a closely watched Bank of England (BoE) poll. This should help to ease concerns around sticky domestic inflation, with the figure down from an increase of 4.9% in February. It was also the lowest figure submitted since the question was first asked to businesses, who have expected wages to grow by more than 5% for most of the last two years. This fall in wage growth expectations should help to support the view that it’s time to start lowering interest rates, with the first cut by the BoE anticipated in the summer.

Andrea Wood, Chartered MCSI
Investment Manager