UK’s FTSE 100 share index hits record closing high despite economy shrinking in April – as it happened
UK economy shrank by 0.3% in April, biggest fall since October 2023, as trade with the US slumped.. but FTSE 100 ends at new record close
Nicholas Hyett, Investment Manager at Wealth Club, blames a cocktail of headwinds to growth" for the 0.3% fall in UK GDP in April.
Hyett says:
In the very short term the change to Stamp Duty rules have put the legal and property services on ice - with legal activities down 10.2% month-on-month.
New barriers to trade with the US and changes to employment costs, from a higher living wage and increased national insurance contributions, are a longer term challenge.
The 0.3% m/m fall in real GDP in April supports our view that the strength in Q1 was unsustainable. This won't prompt the Bank of England to cut interest rates next Thursday. But it is one more piece of news pointing to another cut in August."
We still expect the Bank Rate to be maintained at 4.25% in the June meeting, to allow still troubling earnings growth to continue to ease. We anticipate the next rate cuts to occur in the August and November meetings to 3.75%, prompted by mounting economic hardships."
While there is little chance of any change at next week's meeting, we see a strong possibility that the MPC ditches its hawkish bias, which could pave the way for an August cut."
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