DAVY VIEW

There is no doubt the UK’s economic performance has proven far more resilient than expected, evident in yesterday’s flash composite PMI at 53.9 in May – pointing to improving conditions and on past form consistent with 0.4% GDP growth. However, the sting in the tail is signs of persistent inflation pressures that will force the Bank of England into further rate hikes. This morning’s CPI inflation data show a fall in the headline rate to 8.7% but with core inflation accelerating to 6.8%, well ahead of expectations.