UK bonds to fade in medium term

Although recent data is coloured by events in the Gulf, the outlook for growth in the UK has not improved. Sterling may have weakened against the euro but industrial production remains subdued and consumption is under pressure. Consumer confidence, rising house prices and full employment have all helped underpin consumer activity in the past few years but these factors are beginning to recede. The subdued growth recorded in the first quarter hints at a sharp rise in spare capacity and there is nothing to suggest this will disappear any time soon. While inflation remains above its...