{"id":5817,"date":"2022-05-10T10:14:09","date_gmt":"2022-05-10T09:14:09","guid":{"rendered":"https:\/\/new.contentdeployment.co.uk\/tomd\/?p=5817"},"modified":"2022-05-10T10:14:12","modified_gmt":"2022-05-10T09:14:12","slug":"economic-review-april-2022","status":"publish","type":"post","link":"https:\/\/new.contentdeployment.co.uk\/tomd\/2022\/05\/10\/economic-review-april-2022\/","title":{"rendered":"Economic Review – April 2022"},"content":{"rendered":"
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IMF cuts growth forecast<\/strong><\/p>\n<\/div>\n\n

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The International Monetary Fund (IMF) has warned that economic\ndamage from the Ukraine conflict will contribute to a significant slowdown in\nthe global economy with the UK set to be amongst the hardest hit.<\/strong><\/p>\n<\/div>\n\n

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In its latest assessment of world economic prospects, the IMF said\nthe war in Ukraine is driving up fuel and food prices and that this will hit\nfuture growth prospects. Global growth is now predicted to slow from an\nestimated 6.1% last year to 3.6% in both 2022 and 2023, 0.8 and 0.2 percentage\npoints lower, respectively, than the organisation\u2019s previous forecast published\nin January. <\/p>\n<\/div>\n\n

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For the UK, the international soothsayer now predicts growth of\n3.7% this year, down from January\u2019s 4.7% prediction. In 2023, the UK is\nforecast to have the slowest growth rate among the G7 advanced economies at\njust 1.2%, almost half the level of the previous forecast. The IMF said this\ndowngrade reflected elevated inflationary pressures and tighter monetary policy,\nalong with the UK\u2019s ongoing labour supply issues. <\/p>\n<\/div>\n\n

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Meanwhile, the latest growth figures released by the Office for\nNational Statistics (ONS) revealed a larger than expected slowdown in February,\nwith the UK economy expanding by just 0.1%. This was significantly below\nJanuary\u2019s figure of 0.8% and lower than the consensus forecast in a Reuters\npoll of economists which predicted growth of 0.3%. ONS said the slowdown partly\nreflected a decline in manufacturing, with car production sharply down due to\ncomponent shortages, and falls in computer goods and chemical products.<\/p>\n<\/div>\n\n

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Survey data also points to a more\nrecent cooling in the pace of UK output. The preliminary headline reading of\nthe S&P Global\/CIPS Composite Purchasing Managers\u2019 Index dropped to a\nthree-month low of 57.6 in April, down from 60.9 in March, as high inflation\nand the Ukraine conflict weighed on service sector sentiment.<\/p>\n<\/div>\n\n

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Inflation soars to 30-year high<\/strong><\/p>\n<\/div>\n\n

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The latest inflation statistics showed that\nconsumer prices in the UK are now rising at their fastest rate in three decades,\nwith further upward pressures in the pipeline.<\/strong><\/p>\n<\/div>\n\n

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ONS data released last month\nrevealed that the Consumer Prices Index 12-month rate \u2013 which compares prices\nin the current month with the same period a year earlier \u2013 rose to 7% in March.\nThis was above analysts\u2019 expectations and a significant jump compared to the\nprevious month\u2019s rate of 6.2%.<\/p>\n<\/div>\n\n

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Fuel was the largest single upward\ncontributor to March\u2019s figure, with average petrol prices rising by the biggest\nmonthly amount since records began in 1990. However, ONS also noted that price\nincreases were broad-based with both the food and furniture sectors witnessing\nnotable rises between February and March. <\/p>\n<\/div>\n\n

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In addition, the latest data does\nnot yet reflect the average consumer\u2019s \u00a3700-a-year increase in energy bills\nfollowing Ofgem\u2019s price cap changes introduced on 1 April. Russia\u2019s invasion of\nUkraine is also clearly adding further to current cost pressures, with the\nprice of oil and other commodities continuing to climb higher.<\/p>\n<\/div>\n\n

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Commenting on the data, CBI Lead\nEconomist Alpesh Paleja said, \u201cThe latest rise in inflation will not be the\nlast. We\u2019ll see another jump over April, as the rise in Ofgem\u2019s energy price\ncap comes into effect. Beyond this, volatility in global commodity prices and\nongoing supply chain disruption will continue to stoke price pressures.\u201d<\/em> <\/p>\n<\/div>\n\n

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March\u2019s inflation surge has heaped\nfurther pressure on Bank of England policymakers, with Bank Governor Andrew\nBailey admitting they were walking a \u201cvery tight line\u201d<\/em> between tackling\ninflation and avoiding recession. The next meeting of the Bank\u2019s Monetary\nPolicy Committee is set to conclude on 5 May, with financial markets expecting\nit to yield another interest rate hike as policymakers bid to bring inflation\nback towards their 2% target.<\/p>\n<\/div>\n\n

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Markets <\/strong>(Data\ncompiled by TOMD)<\/strong><\/p>\n<\/div>\n\n

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April was a mixed trading month\nfor global s<\/strong>tock markets.\nCorporate reports were influential with a raft of earnings releases in both\nEurope and the US. The Dow Jones faltered as earnings from several large tech\nfirms failed to impress.<\/strong><\/p>\n<\/div>\n\n

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The\ntech-focused NASDAQ posted its worst monthly loss since 2008.\nThe Dow closed the month down 4.91%, while the NASDAQ finished down 13.26%. Data released toward month end\nshowed the US economy shrank by 1.4% in Q1, with surging inflation, the\nwar in Ukraine and the impact of the Omicron variant weighing.<\/p>\n<\/div>\n\n

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In the UK, the FTSE 100 closed April up 0.38% on 7,544.55, while the midcap-focused FTSE 250 registered a loss of 2.13%. Stocks most exposed to Britain\u2019s domestic economy have underperformed year-to-date, while the FTSE 100, whose firms earn three quarters of their revenue abroad, with high exposure to buoyant commodities prices, fared better. The AIM registered a loss of 1.93% in April. Toward month end, London markets were supported by gains among the heavyweight commodity stocks, which were buoyed by oil prices.<\/p>\n<\/div>\n\n

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Following the release of a Chinese wide-ranging economic stimulus plan, Asian markets were reassured at month end. In Japan, the Nikkei 225 ended April on 26,847.90, down 3.50%, and the Euro Stoxx 50 closed the month down 2.55% on 3,802.86.<\/p>\n<\/div>\n\n

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On the foreign exchanges, sterling closed the month at $1.25\nagainst the US dollar. The euro closed at \u20ac1.19 against sterling and at $1.05\nagainst the US dollar.<\/p>\n<\/div>\n\n

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Brent Crude closed the month trading at around $108 a barrel, a gain of 0.47%. Gold is currently trading at around $1,915 a troy ounce, a loss of 0.45% on the month.<\/p>\n<\/div>\n\n

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Wage squeeze continues<\/strong><\/p>\n<\/div>\n\n

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While\nthe latest set of labour market statistics did report further growth in nominal\nwage levels, the data also showed that basic pay has continued to fall behind\nthe spiralling rate of inflation.<\/strong><\/p>\n<\/div>\n\n

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ONS figures released last month showed that average weekly\nearnings, excluding bonuses, rose at an annual rate of 4.0% across the December\n\u2013 February period. However, although this does represent an increase from 3.8%\nin the previous three-month period, it also means that regular pay packets\nactually shrank once adjusted for inflation.<\/p>\n<\/div>\n\n

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Indeed, the latest data shows that, in real terms, regular\nearnings fell by 1.0% compared to year earlier levels. This led ONS\nspokesperson Darren Morgan to conclude that, \u201cbasic pay is now falling\nnoticeably in real terms\u201d <\/em>as the cost-of-living crunch deepens.<\/p>\n<\/div>\n\n

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There was better news in terms of unemployment, with the jobless\nrate dropping further below its pre-pandemic level \u2013 in the three months to\nFebruary, the rate fell by 0.2 percentage points to 3.8%, its joint lowest\nlevel in almost 50 years. ONS did, however, say that the fall largely reflected\na rise in the number of people who are now no longer working or looking for\nwork and thereby \u201cdisengaging from the labour market.<\/em>\u201d<\/p>\n<\/div>\n\n

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Retail sales fall sharply<\/strong><\/p>\n<\/div>\n\n

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Official retail sales figures have revealed a\nsharp decline in sales volumes during March as the cost-of-living crisis pushes\nUK consumer confidence to a near all-time low.<\/strong><\/p>\n<\/div>\n\n

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According to ONS data, total\nretail sales volumes fell by a greater than expected 1.4% in March while\nFebruary\u2019s figure was revised down to a 0.5% fall. ONS said both food and\npetrol sales declined sharply during March, citing the impact of rising prices\nas a possible explanation, while online sales were hit hard as consumers cut\nback on non-essential spending.<\/p>\n<\/div>\n\n

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Survey\ndata released last month also shows that the cost-of-living impact has knocked\nhouseholds\u2019 confidence in the economy and their personal finances. GfK said its\nheadline consumer confidence index fell to -38 in April; this reading was\nwithin a whisker of the 50-year-old index\u2019s all-time low, hit during the depths\nof the global financial crisis in July 2008.<\/p>\n<\/div>\n\n

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Responding\nto the latest data, British Retail Consortium Chief Executive Helen Dickinson\nsaid, \u201cMarch sales were impacted by rising concerns around inflation as\nconsumer confidence tumbled. The cost-of-living squeeze has many consumers\nthinking twice about major purchases, while their expectations of future\nfinancial situation plummeted to lows not seen since the financial crisis.\u201d<\/em><\/p>\n<\/div>\n\n

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It is important to take professional advice before making any\ndecision relating to your personal finances. Information within this document\nis based on our current understanding and can be subject to change without\nnotice and the accuracy and completeness of the information cannot be\nguaranteed. It does not provide individual tailored investment advice and is\nfor guidance only. Some rules may vary in different parts of the UK. We cannot\nassume legal liability for any errors or omissions it might contain. Levels and\nbases of, and reliefs from, taxation are those currently applying or proposed\nand are subject to change; their value depends on the individual circumstances\nof the investor. No part of this document may be reproduced in any manner\nwithout prior permission.<\/strong><\/p>\n<\/div>","protected":false},"excerpt":{"rendered":"

IMF cuts growth forecast The International Monetary Fund (IMF) has warned that economic damage from the Ukraine conflict will contribute to a significant slowdown in the global economy with the UK set to be amongst the hardest hit. In its latest assessment of world economic prospects, the IMF said the war in Ukraine is driving […]<\/p>\n","protected":false},"author":12,"featured_media":5820,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[32,34],"tags":[],"hd_content_source":[],"_links":{"self":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/5817"}],"collection":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/users\/12"}],"replies":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/comments?post=5817"}],"version-history":[{"count":4,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/5817\/revisions"}],"predecessor-version":[{"id":5825,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/posts\/5817\/revisions\/5825"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/media\/5820"}],"wp:attachment":[{"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/media?parent=5817"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/categories?post=5817"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/tags?post=5817"},{"taxonomy":"hd_content_source","embeddable":true,"href":"https:\/\/new.contentdeployment.co.uk\/tomd\/wp-json\/wp\/v2\/hd_content_source?post=5817"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}