12 October 2023
If you are covering the latest UK GDP statistics for August, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“This morning’s UK GDP figure provides another small glimmer of hope that the UK could scrape through and avoid a recession, with a slight 0.2% uptick in August following a disappointing 0.6% dip in July (revised down in the latest figures). Just this week the IMF predicted that the UK would be the slowest growing economy across the G7 next year, and though 2024 may prove more difficult, this morning’s figure provides some relief that though economic growth is challenging, it is not yet non-existent for the UK.
“We have also started to see hints that the pressure of the cost-of-living crisis is beginning to lift for households. Prices remain considerably higher than pre-pandemic periods, but disposable incomes are starting to improve which has provided some much-needed relief to those who have been struggling. The Bank of England’s decision to pause rate hikes has also offered some respite to homeowners and the housing market which have been grappling with high mortgage rates.
“Though the Bank of England has pressed pause on its rate hiking cycle for now, it still has an incredibly challenging job to do and it may still return to raising rates later in the year or into the next. However, with an election fast approaching the Bank will be keen not to overcorrect and will instead begin to assess what impact its action has had to date. We don’t necessarily see the case for further rate rise and things will continue to bite for consumers as a result of the lag effect of the rate rise. With rates now higher for longer, consumers and businesses will need to adapt to this new environment, one many haven’t faced in their lifetimes.
“The economy may be holding up for now, but whether or not the UK truly manages to avoid a recession is yet to be seen. The speed of interest rate rises and the impact of the cost-of-living crisis may mean the pain is simply delayed, and 2024 could prove considerably more difficult.”
