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Local Elections Show Voter Status Quo

08 May 2018

Jack Turner, Research Analyst

This week we review the top line results of the UK local elections, and three pieces of economic news coming out of the UK, EU and US. We also provide an update of Sterling’s recent change in value.

Local Elections Show Voter Status Quo

The local elections held on 3 May saw Labour with no change in the number of councils they control, the Conservatives losing overall control of two councils and the Liberal Democrats (Lib Dems) finishing with four more councils than previously. While all sides claimed success, the projected votes show that the Conservatives and Labour continue to remain neck and neck in terms of their share of the national vote should a general election follow. Labour failed to pick up the seats in London they hoped would ‘turn red’, but gained control in Plymouth – the only target that did not host a rally. Both parties will need to try new tactics to try to gain more voter support.


The IHS Markit/ CIPS services Purchasing Managers Index came in at 52.8 for April, up from the 51.7 recorded in March – a 20 month low. However, the increase was noted as only a modest one with the rate of growth the second weakest since September 2016. However, it was published alongside the weakest upturn in employment since March 2017. Meanwhile, survey respondents also noted that higher payroll costs continued to drive up operating expenses and place a squeeze on margins, although other inflationary pressures were seen as moderate.

The Eurozone’s GDP growth rate slowed to 0.4% in Q1 2018, the slowest pace in 18 months, and which compares to 0.7% expansion in Q4 2017. However, there is no consensus on the reasons for the region’s slowdown after last year’s growth boom, although some have blamed fears of a trade war with the US, after Donald Trump’s recent threats, and others adverse weather. Meanwhile, others are confident that the Q2 figures will be better as consumption growth picks up in Q2 and pushes the quarter’s GDP growth rate back up to levels of 0.5% to 0.6%. GDP estimates from Germany have not yet been released, but France’s statistics agency has reported a Q1 growth decline from 0.7% to 0.3% and growth in Spain was estimated to be unchanged at 0.7%.

The Federal Reserve (Fed) decided to hold interest rates unchanged at their 1.5% to 1.75% range, but stated that price growth had moved closer to its internal target. Investors took the comments to signal that the Fed is getting more confident in its inflationary outlook as it prepares for further increases in short term interest rates in the coming months and that the path of future rate hikes could be slightly steeper over the next few years than previously set out.

The poor economic data coming out of the UK led to a decline in the value of Sterling from US$1.43 in mid April to US$1.35 as at the end of last week. Aside from the slow GDP growth rate for Q1, we also saw worse than expected factory orders while consumer credit demand came in at just £300m in March – the smallest increase since November 2012 and well down on the monthly average for the latest six months of £1.5bn. The increased holdings in the US Dollar bought in March – representing 5% of the value of the portfolio when we use the Balanced fund as an example – helped support portfolios. The data also led to a much reduced probability that the Bank of England will raise rates at its May meeting. On 18 April, there was at 85% market probability for a rate rise. By 5 May, that percentage had fallen to 12.5%.

10 May – EU Balance of Trade (Mar) // 10 May – UK Balance of Trade (Mar) // 10 May – US Inflation Rate (Apr)



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The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.

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