Britain’s Inflation Slowdown Masks Deeper Pressure

NatWest argues the recent easing in UK inflation offers only temporary relief, as weakening growth collides with persistent underlying price pressures and a deteriorating labour market. 

• UK inflation slowed to 2.8% in April, but prices still rose 1.4% over the past two months, leaving households under continued pressure.
• Consumer demand softened meaningfully, with retail sales excluding fuel falling 0.4% m/m and discretionary spending weakening sharply.
• The labour market continues to loosen, with unemployment rising to 5%, payroll employment falling, and vacancies declining across most sectors.

NatWest’s broader concern is that the UK increasingly resembles a classic stagflation problem: slowing activity alongside inflation that remains too elevated for policymakers to fully relax.