14 June 2023
If you are covering April’s GDP figure, please see the following comment from Marcus Brookes, chief investment officer at Quilter Investors:
"While fears of a recession in the short term have not been realised, the UK is still far from out of the woods. The latest figures confirm UK GDP grew by 0.2% in April 2023 and GDP grew by 0.1% in the three months to April 2023. Considering inflation remains far stickier than anyone could have hoped, the Bank of England are likely to be forced to raise interest rates in the near future and pile further strain on an already ailing economy ultimately pushing growth down.
"Over the past week, we have seen mortgage rates climb once again following a higher predicted interest rate peak and with a predicted 1.4 million fixed rate deals set to come to an end this year there will be a huge amount of strain placed on people’s monthly outgoings. This will ultimately suck a huge amount of money out of the economy with people having far less each month to spend on goods and services making the threat of recession loom ever larger.
"That said, manufacturing globally looks like it is slowing down, but service Industries remain pretty robust. A good example of this is that we have seen Germany enter into a technical recession, which is unsurprising given its manufacturing base but the UK remains resilient due to the larger services element to the economy. The UK services sector grew by 0.3% in April 2023 according to the latest. A strong services sector is also a feature of the US which also remains robust, whilst China’s manufacturing bias means it is clearly slowing too.
"All eyes will be on the next inflation figure as this will drive the fiscal decision making which in turn may force the UK into recession. Due to a lag between action and reaction from any policy decision it is easy for the Bank of England to go too far or not far enough. The institution has to walk a tight rope between getting inflation under control and avoiding pushing the UK into recession all while having to deal with strong economic headwinds."
