13 December 2024
If you are covering the latest UK GDP statistics, please find below a comment from Lindsay James, investment strategist from Quilter Investors:
“This morning’s GDP figure presents the final snapshot of the UK economy before the Bank of England makes its last interest rate decision of 2024, and the picture is not all that pretty.
“Following a 0.1% contraction in September, October saw a similarly difficult month with a further 0.1% fall in monthly real GDP putting the UK on the cusp of a recession. The UK economy had been building relatively good momentum in the earlier part of this year, but concerns around the messaging in the lead up to the budget saw consumers hit pause on spending while they awaited more details on the government’s plans.
“Over three months it managed to eke out a gain of 0.1%, driven in part by 0.4% growth in the construction sector and 0.1% growth in the service economy, however production declined 0.3% over the same period. “
“While we could see an uptick in the coming months after the less bad than feared budget, there are other risks to the UK economy which could further dampen progress. Businesses will soon feel the effects of increased national insurance contributions, which in many cases will subsequently impact their employees as the costs are passed on. Wage growth could take a hit as a result, and this could see a lull in spending.
“Donald Trump’s election win also leaves a considerable amount of uncertainty on the horizon, but the UK should be relatively well protected from his proposed tariffs compared to its neighbours. The UK’s exports to the US are largely in the form of services as opposed to goods, so although the US is its biggest export market, the impact could be less keenly felt.
“It is looking increasingly likely that the Bank of England could stand alone in its decision at the December meeting to hold interest rates at their current level while the other central banks opt for cuts. The outlook for inflation in the UK remains uncertain, however with growth still weak whilst signs emerge that wage inflation will be meaningfully lower in the year ahead, the Bank may make a return to cuts in the new year.”
