This week

During a truncated week, counting down to the Queen’s Platinum Jubilee, financial markets still managed to scale near yearly high(nesses) before retreating sharply before the end of the week.

It was actually Henry VIII who was the first monarch who insisted on being addressed as “your majesty”, starting a trend that would last for several centuries to come. However, this week, a different type of address made for interesting news, as Nationwide Building Society released its Housing Price Index numbers on Wednesday.

The figures for May pointed to a slight slowing in the rate of annual house price growth to 11.2%, down from 12.1% the previous month. However this was now the tenth successive monthly increase, with Robert Gardner, Nationwide's Chief Economist, commenting:

“Despite growing headwinds from the squeeze on household budgets due to high inflation and a steady increase in borrowing costs, the housing market has retained a surprising amount of momentum.”

The average house price in the UK now sits at £269,914.

Although probably not spent on bunting and jugs of Pimms just yet, Bank of England (BoE) data, released on Tuesday, suggested credit card borrowing in Britain rose last month at the fastest annual rate since 2005, possibly reflecting the growing squeeze on the cost of living for the consumer. The BoE said credit card borrowing was 11.6% higher than this time last year, marking the biggest increase since November 2005.

The data is hardly surprising as last month households were hit by a cocktail of both surging energy costs and increased taxes. The hit to disposable income, likely the worst since modern records began back in the mid-1950s, looks to be forcing an increasing number down the road of borrowing to make ends meet.

The crowning glory of the week’s data came in the form of US job openings, released during the middle of the week. Data showed that while vacancies fell in April, they remained at persistently high levels. This suggests that continued wage increases will contribute to uncomfortably high inflation for some time to come, as a scramble for workers forces firms to pay more and more for talent.

Next week

After the pomp and ceremony of an extended Jubilee weekend, with the bunting being taken down and commemorative china plates stored safely in the cupboard, it seems fitting the coming week starts with domestic retail sales numbers.

Unfortunately Tuesday’s data will not cover the extraordinary amount of Jubilee memorabilia no doubt purchased over the previous week, however it will offer a good gauge on spending on a year-on-year basis to the end of May. Released by the British Retail Consortium, the numbers tend to have a narrower focus than the main government numbers as these only focus on those retailers who are members. Nonetheless, it will help us to understand just how strong the consumer is feeling against a backdrop of rising prices across the board.

With markets closed in Europe in observation of Whit Monday celebrations, we stay on domestic shores for UK services PMI data, released during the early part of the week. Accounting for the vast majority of domestic economic activity, the statistics are the results of a survey of about 650 purchasing managers which asks respondents to rate the relative level of business conditions including employment, production, new orders, prices, supplier deliveries and inventories. Businesses and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy, giving weight to the release, potentially causing short term volatility in the markets.

On the subject of inflation, the coming week will be rounded off by US CPI figures, released on Friday. Measuring the change in the price of goods and services, the data will not only be scrutinised by the markets but also the US Federal Reserve, who seems to approaching a cross roads as to how many more rate hikes they will be making towards the end of the year as the world’s largest economy begins to slow.

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding as at 02 June 2022.