The Monday Briefing
A succinct and eclectic weekly take on economics and finance from Ian Stewart, Deloitte's Chief Economist in the UK
UK growth – OK, all things considered
For all that’s been thrown at it, the UK economy has not done too badly so far this year.
Despite the pall cast by last October’s tax-raising budget and low levels of business optimism, growth roared back in the first quarter, exiting a period of stagnation, with GDP up a hefty 0.7%. At least for the first quarter the government can claim it has met its manifesto pledge to make the UK the fastest-growing economy in the G7. (It is worth noting that Germany, long Europe’s growth laggard, also posted unexpectedly strong growth in the first quarter.)
UK migration nation
The UK has been a major net ‘importer’ of people since the 1990s, with immigration running well ahead of emigration. The UK’s foreign-born workforce increased by an average of 5% a year between 1998 and early 2020, roughly ten times the annual growth rate in the UK-born workforce.
The bond vigilantes are back
Last Thursday the US House of Representatives passed president Trump’s tax-cutting budget bill by a single vote. The bill now goes to the Senate for ratification.
America’s growing debt mountain
After a sell-off following the announcement of sweeping US tariffs early last month, equities have rallied on hopes that the US will strike trade deals. The US and UK settled on a framework agreement on trade earlier this month and last week the US and China agreed to cut tariff rates and to open trade negotiations. Press reports suggest that other outline agreements may be in the offing. US equities have risen 20% since 8 April, more than making up losses on the initial tariff announcements.
Bank of England cuts interest rates despite expected pickup in inflation
Last week the Bank of England (BoE) cut interest rates from 4.5% to 4.25%, the fourth reduction since last summer when rates stood at 5.25%. The interest rate decision was not unanimous with five of the nine Monetary Policy Committee members voting to cut rates, two voting to keep rates on hold, and two voting for a larger cut to 4.0%.
The China technology challenge
In January, Chinese company DeepSeek stunned financial markets with the release of its generative artificial intelligence model R1. It matched the efficacy of market leading US firm OpenAI’s most advanced models but was produced at a fraction of the cost.
Tariffs eat into growth outlook
Last week the International Monetary Fund (IMF) cut its forecast for global growth this year from 3.2% to 2.8% and halved its forecast for growth in global trade.
The dollar - past, present, future
Recent weakness in financial markets has been accompanied by a sell-off in the US dollar. Along with a sell-off in equities and bonds, the dollar has fallen to its lowest level since 2022, down over 9% against a basket of currencies since the start of the year.
Tariffs and uncertainty: implications for growth and inflation
Last week global equity markets staged a partial recovery after president Trump announced that most higher rates of tariffs announced the previous week would be postponed for 90 days pending negotiations. The S&P500 jumped 9.5% on the news.
US tariffs assessed
America’s new tariffs are broader and levied at higher levels than had been expected. The ensuing sharp sell-off in equities speaks to market concerns that tariffs will slow global growth. Everything now depends on whether the higher tariffs are here to stay.
A chilly spring statement
When Harold Macmillan, Britain’s prime minister from 1957 to 1963, was asked what he saw as the greatest challenge for a politician, he reputedly replied, ‘Events, dear boy, events’.