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Monday Morning Round-up

Today will see the Parliamentary Privileges Committee meet in Westminster to decide on when to publish their report into whether former PM Boris Johnson mislead the House of Commons.

Privileges Committee, Conservative Resignations and By-Elections

With speculation mounting on Johnson’s conduct over ‘party-gate’, on Friday evening the MP for Uxbridge and South Ruislip resigned along with Nadine Dorries and Nigel Adams who also quit with immediate effect. With these three resignations coming in quick succession, speculation grew on whether there could be a mutiny of disgruntled Johnson allies wanting to cause further headaches for Rishi Sunak and the conservatives which according to a study by Focaldata could be left with as few as 129 seats at the next GE.

With Johnson resining, he denounced the Parliamentary Privileges Committee’s investigation as a “witch hunt” as pundits raced to consider the outcomes of a by-election in Uxbridge
and South Ruislip. This will form one of three by-elections set to be held soon. In the 2019 election, Johnson had a majority of 7,210, though many are now suggesting that Labour could make considerable ground here.


If the seven-member committee lead by Harriet Harman finds that Johnson committed ‘contempt’ towards parliament, they will make a recommendation which will subsequently be subject to a vote in the House of Commons. Of course, given that Johnson has already resigned, the privileges committee’s recommendation (if they still chose to make one) will be largely symbolic. Indeed, according to the BBC, “the committee was preparing to recommend a 10-day suspension for Mr Johnson from the Commons, the BBC has been told, which would have resulted in a recall petition among his constituents and a potential by-election”.

KPMG Upwardly Revises UK Growth Forecasts

KPMG is the latest group to have joined the list of those no longer forecasting the UK to enter a recession. The firm now predicts that the UK economy will grow 0.3% this year, having upwardly revised this from a marginal 0.1% expansion. While it noted that households would be further squeezed with further interest rate hikes and persistently high inflation, they maintain that the economy has seen stronger momentum than forecasts. This comes as the CBI also recently upwardly revised their growth expectations having moved it from a 0.4% contraction to a 0.4% expansion over 2023.

KMPM expect the Bank of England to have another 75bps of hikes, hitting a terminal rate of 5.25% later this year. Here, regarding inflation they said that “the pace of moderation is slower than we previously thought” and thus more hikes were warranted.

On a longer-term view, KPMG are provisionally forecasting 1.1% growth over 2024 with inflation at 2.9%. All eyes are now on UK inflation data next Wednesday, followed by the BoE’s interest rate decision the following day.

Gas Prices Rise on Supply Side Concerns

Despite UK natural gas prices trading close to 2-year lows in early June, over the last week prices have soared from £58.00/thm to £79.25/thm this morning. The earlier trend of decline had primarily been driven by warmer-than-expected weather as well as an anticipated increase in wind power generation. These conditions fed into the UK’s National Gas Transmission forecasting demand to hover around 33bn cubic meters over the summer period – a considerable decline from the 42bn used last summer. Nevertheless, last week saw


prices climb as markets weighed on a drop in exports from the US as contracts pivot towards Asia. Moreover, the restart of Hammerfest Arctic LNG was further postponed, leading investors to weigh on supply side cuts. The significance of any supply side cuts from Norway is hard to understate given that some 77% of all gas imports into the UK come from Norway, with the UK importing 50% of its total usage.

Looking Ahead

While today is a little light on tier one data, tomorrow all eyes will be centred on UK unemployment where it is expected to tick up 10bps to 4%. This will be followed by US inflation data and Governor Bailey speaking at 13:30 and 15:00, respectively. Markets will be paying close attention to US inflation data given the Fed’s interest rate decision the following day, where investors are weighing on a ‘skip’ ahead of a further 25bps hike later this summer.

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