Rishi Sunak’s slim chance of pulling off a victory against the odds in July’s general election depends on voters buying the argument that tough decisions taken since he became prime minister are paying off.
That claim will be tested over the next six weeks – with every piece of economic news more closely scrutinised than usual for evidence that the UK’s tentative economic recovery is gaining momentum or has started to falter.
There are five key dates – crammed into a 10-day period in the middle of the campaign – to look out for.
11 June: labour market figures
This could be one of the trickier pieces of economic news for Sunak to cope with since the last set of official data showed unemployment rising and job vacancies declining. Despite this evidence that the labour market is cooling, earnings growth remained strong, rising at an annual rate of 5.9%. In better news for the prime minister, wages have been rising more strongly than prices for the past 10 months, resulting in rising living standards.
The Conservatives will say: four million jobs have been created since 2010 and workers are now becoming better off.
Labour will say: for the first time in recent history, voters will be worse off at the end of a parliament than they were at the start.
12 June: growth figures for April
One factor behind Sunak’s decision to call an election was the unexpectedly strong growth figures for the first three months of 2024, which showed national output 0.6% higher than in the final three months of 2023 and brought to an end the UK’s short and shallow recession. Paul Dales, the chief UK economist at the consultancy Capital Economics, expects gross domestic product to rise by 02% between March and April, pushing up the quarterly growth rate from 0.6% to 0.8%.
The Conservatives will say: Britain is growing faster than other leading developed economies.
Labour will say: over the past 14 years Britain’s growth and productivity record has been dismal.
19 June: annual inflation in the year to May
This is probably the most important single piece of economic news during the campaign, given Sunak’s claim that the UK’s cost of living problem has now been cracked. The all-items inflation rate came down from 3.2% in March to 2.3% in April and is set to fall further in May. In part, that’s because consumer prices rose by 0.7% last May, a hefty increase that is unlikely to be repeated this year. Bruna Skarica, the chief UK economist at Morgan Stanley, sees the headline inflation rate falling to 2% – smack on the government’s target. Services inflation, which is closely watched by the Bank of England, should fall from 5.9% to 5.4%, Skarica says.
The Conservatives will say: our tough action has brought stability to the economy.
Labour will say: prices are 20% higher than they were at the start of the cost of living crisis and are still going up.
20 June: Bank of England interest rate decision
The Bank of England raised interest rates 14 times between December 2021 and August 2023 – a jump from 0.1% to 5.25% – and there had been growing speculation that its monetary policy committee might start reducing borrowing costs at its June meeting. In theory, there is nothing to prevent the Bank cutting rates during an election campaign, but it would need to have strong evidence to do so. The City now sees little chance of a rate cut next month, with attention focused on whether the Bank will cut rates at its first post-election meeting in August.
The Conservatives will say: interest rates are coming down soon because we have fixed the economy.
Labour will say: homeowners are paying for Tory mismanagement through higher mortgage rates.
21 June: retail sales and public finances
The last of the big five economic events between now and the election, and, while less significant than the other four, it is not without interest. A strong retail sales number would chime with recent evidence that consumers are feeling more confident about the state of their own finances and the economy more generally. Falling retail sales would suggest the absence of a feelgood factor.
The poor state of the public finances helps explain why Sunak called an early election because had they been in better shape Jeremy Hunt would now be planning to cut national insurance contributions for a third time in an early autumn statement. The size of the May deficit will have little bearing on the election but will provide a guide to the difficult choices either a Conservative or Labour chancellor might be faced with in the next parliament. The deficit in May 2023 was just over £14bn.
The Conservatives will say: life is getting better, so don’t let Labour wreck things.
Labour will say: you are paying higher taxes because the Tories crashed the car. Take away the keys.
Dales says overall the economic news over the next six weeks will be “reasonably positive” but suspects it will not have much of an impact. “People’s views on the economy are formed and baked in,” he says. “They are not going to change that much.”