Ear to the Ground
17 April 2025
Let’s talk about something else. Since Trump’s announcement on tariffs it has been the main factor influencing investment markets and investor thoughts, and rightly so. However, there have been lots of other data points for us to consider so let us get our teeth into those.
Starting here at home, this week we saw the release of the latest inflation data to March. Year on year, consumer prices rose 2.6%. Whilst this remains above the target set for the Bank of England of 2%, the direction of travel was pleasing. The current reading was not only below that recorded in February of 2.8%, but it was also below the market consensus forecast of 2.7%.
Staying with the UK, we also saw the release of key labour market data. Beginning with wages, average earnings still continued to grow at a meaningful rate, 5.9% year on year to February, excluding bonuses. This was ahead of the January reading of 5.8% but a little below the consensus forecast of 6%. Consumer price inflation to February recorded 2.8%, meaning, on average, workers are continuing to see strong real wage growth, currently in excess of 3%. Private sector wage growth held at 5.9% whilst public sector wage growth jumped to 5.7%.
The unemployment rate held steady at 4.4% meanwhile, in line with expectations, but the number of employees on the payroll fell by 78,000. As the chart from JP Morgan shows, this is a meaningful fall relative to recent history. Could this be suggesting that the UK economy is already struggling?
As a consequence, we have seen a meaningful shift in the expectations for the UK base rate. The recent data points, coupled with the negative impact tariffs could have on global trade and economic growth, now mean that the market believes that we could see 3 interest rate cuts by the end of the year. The UK 2 year gilt yield, at just over 4% at the time or writing, certainly suggests cuts are on the way.
This article is for information purposes only and should not be construed as advice. We strongly suggest you seek independent financial advice prior to taking any course of action.
The value of this investment can fall as well as rise and investors may get back less than they originally invested. Past performance is not necessarily a guide to future performance. The Fund is suitable for investors who are seeking to achieve long term capital growth.
The tax treatment of investments depends on the individual circumstances of each client and may be subject to change in the future. The above is in relation to a UK domiciled investor only and would be different for those domiciled outside the UK. We strongly suggest you seek independent tax advice prior to taking any course of action.
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