Household savings data from the Bank of England’s Money and Credit release is out on Friday. In the early days of lockdown, monthly household savings soared to £30mn, and last month’s figures were still significantly above pre-pandemic levels: any indication that households are saving less will be telling.
Although high borrowing and low savings are often associated with consumer exuberance, the opposite is true here. Recent ONS data found that consumers were increasingly tapping into savings and using more credit than usual as inflation squeezes their budgets ever tighter. The release will also cover mortgage approvals, which fell below pre-pandemic level last month. Mortgage lending also decreased in April, and it seems likely that the downward slide will continue this month.
Nationwide’s House Price Index is out on 29 June. Although house prices rose in May, anticipate a slowdown at some point over the coming months. The question is, when? Low unemployment and a meagre stock of homes may keep up momentum for now, but affordability could soon start to groan as the Bank of England’s rate hikes trickle through to higher mortgage costs.
Nationwide also expects that lower consumer confidence will begin to dampen housing growth, and the CBI’s Growth Indicator will give us a clearer idea of business sentiment on 26 June. Private sector activity is forecast to stall, and consumer services activity is expected to drop significantly. The CBI also expects business confidence to falter as firms face continued pressure to mitigate supply chain constraints.
A raft of EU confidence indicators will also be released next week. GfK German consumer sentiment results are expected to pick up as pandemic restrictions ease, but the war in Ukraine and high inflation will continue to weigh on consumer confidence. Italian, French and German Purchasing Managers' Indices should provide further insight into business confidence in the bloc.
Across the pond, the ISM survey is due for release on 1 July. May’s figures indicated that the US economy had expanded for 24 months in a row – but only just. May’s reading was the second-lowest since September 2020, and June’s figures are expected to sag under continued supply chain constraints. US GDP figures on 29 June will also provide an eagerly anticipated headline figure. The Fed has downgraded its projections, but still anticipates positive growth for the remainder of the year: expect a figure of around 1.7 per cent.
