It seems as if the UK economy has at last given prime minister Rishi Sunak something to boast about, following the drubbing his Conservative party took in local council elections and the defection of two of his MPs to the opposition Labour party. GDP data for the UK came in well above the expectations of the consensus of economists polled by Reuters, growing 0.6% in the first quarter of this year. This is well above Fathom’s estimate of UK trend growth. Consumption also offered positive news, returning to growth following two prior contractions; but investment, crucial for the UK’s long-term growth prospects, remains weak.
There may be more good news coming for the embattled PM: Fathom expects that UK CPI inflation dropped below the 2.0% target in April, reflecting a substantial fall in the contribution to headline inflation from gas and electricity prices. If this is confirmed, and the lower rate of inflation persists, the MPC could begin to cut rates later this year. All of these outcomes may be positive for the Conservatives’ re-election prospects; but the most important statistical outturn for politicians (opinion polls) remains against them. Judging by their current polling performance, economic surprises to the upside will not be enough for them to retain power at the next general election.
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