Leading Indicators | The Political Battleground
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Here we look at the European leading indicators in the world of economics.
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Election 2024: Economic Stability
Of all the promises made in recent manifesto documents, that of ‘stability’ is perhaps the most vital to keep. And if that aim feels lacking in ambition, one only has to look to France, where bond yields have risen sharply in response to recent political uncertainty. Stability, however defined, is also a prerequisite for greater business investment, itself an important driver of economic growth (and demand for real estate).
The hope, made explicit in Labour’s manifesto, is that economic and political stability combined with some targeted government backstopping will entice businesses to invest. Various think-tanks have criticised the major manifesto documents for not recognising either a need for higher taxation or lower spending. So far, UK bond markets have been unperturbed by the implication of greater government borrowing. In fact, bond yields have fallen over the course of the past month. Forecasters expect yields to fall further towards the end of 2024, albeit with a growing disparity in the short-term path.
Life Sciences
Across the British political spectrum, the UK Life Sciences sector continues to be seen as an important driver of economic growth. In their respective manifestos, both Labour and Conservatives align in their goals to enhance funding, bolster R&D, and refine the regulatory framework. Labour's proposals go further to encompass reforms aimed at alleviating lab space shortages in key markets, introducing local growth plans to stimulate regional economies, and leveraging the NHS's capabilities to strengthen the UK's leadership in clinical trials.
Sustained growth in the Life Sciences sector is already boosting employment demand. Healthcare and life sciences companies in the UK are forecasting the strongest employment outlook for the next quarter, with 38% of businesses expecting to hire more staff, according to Manpower.
Rising Confidence
Although recent GDP readings suggest the UK has been in phase of moderating growth, there are also some signs of strength. Stephen Springham has analysed the latest retail sales figures in more detail, and while it is far from a clear picture, retail sales volumes are improving.
This reflects stronger consumer confidence, as noted in the latest GfK Consumer Confidence Index which climbed to -14 in June from -17 in May, marking its third consecutive monthly improvement and reaching its highest level since November 2021. This uptick reflects improved household optimism about the broader economy, following UK inflation data falling back in line with the Bank of England’s (BoE) official target of 2%. Looking ahead, anticipated reductions in interest rates later this year could further stimulate growth by lowering debt-servicing costs.
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