Supermarket chain Sainsbury has announced that after months of rising prices, food inflation is now declining, with May's figure showing a decrease from 15.9% to 15.4%. This news brings relief to households, the Bank of England, and Rishi Sunak. Sainsbury has also reported a significant increase in like-for-like sales (excluding fuel), which jumped by 9.8% in the 16 weeks leading up to June 24. The sharp rise in prices by supermarket chains has been a major driver of food inflation in the UK.
Despite the challenging economic climate in the UK, London businesses are displaying resilience and are positioned to contribute to the country's recovery. The London Chamber of Commerce and Industry's latest Capital 500 survey reveals that firms in the capital are facing rising costs and uncertain consumer demand but remain alert to inflationary threats. The survey shows that 24% of London businesses experienced an increase in domestic sales in the second quarter of the year, up from 21% in the previous three months.
A significant milestone has been reached with the granting of Royal Assent to a landmark Bill, the Financial Services and Markets Act 2023. This legislation is crucial for realizing the government's vision of growing the economy and establishing an open, sustainable, and technologically advanced financial services sector. The Act takes advantage of the opportunities presented by Brexit by tailoring financial services regulation to suit UK markets. It enhances the UK's competitiveness as a global financial center and aims to deliver better outcomes for consumers and businesses. Moreover, the Act includes new powers made available due to Brexit, which are expected to unlock approximately £100 billion for productive investment, foster innovation, and promote economic growth.
In contrast to the UK, the eurozone experienced a greater-than-expected decline in its annual inflation rate in June, which fell to 5.5%. This decline was primarily driven by sharp drops in energy costs. The disparity between the eurozone's inflation rate and the stubbornly high price growth in the UK is becoming more pronounced. According to Eurostat, consumer prices across the eurozone rose by 5.5% in the year leading up to June, down from 6.1% in May and below the projected 5.6%. Energy costs had the greatest impact on the falling inflation rate, with average prices declining by 5.6% in the year to June, compared to a decrease of 1.8% in May.
Preliminary data suggests that business activity growth in Europe slowed down in June, indicating a challenging end to the second quarter. The eurozone's flash composite Purchasing Managers' Index dropped from 52.8 in the previous month to 50.3 in June, falling below analysts' expectations of 52.5. This slowdown has been attributed to higher interest rates and the rising cost of living, which have taken a toll on business activity.
Revised data from the Commerce Department shows that the US economy's growth in the first quarter of the year was stronger than initially reported. The latest figures indicate an annual growth rate of 2%, up from the initial estimate of 1.1% for the January to March period. This news could potentially support arguments for higher interest rates in the largest global economy.