10 May 2024
If you are covering the latest UK GDP figures and the fact the economy is out of recession, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“With interest rate cuts seemingly pencilled in for the summer, the good news continues to flow for the UK as today’s data shows the UK is out of recession. The first quarter saw GDP grow by 0.6%, better than expected, as inflation has eased and the worst of the cost-of-living crisis is behind us. The increase in GDP has primarily been driven by the UK’s strong services sector, which it has come to rely on in recent years to help push the economy forward.
“While growth remains fairly lacklustre compared to the likes of the US, this data shows this should be the year that economic stagnation subsides in the UK and the economy returns to consistent, if unspectacular, growth. It is the unspectacular nature of the growth, however, that is likely to be focus. While the very shallow and short recession appears over, there is a clamour for interest rate cuts to begin in order to stimulate growth and get business moving again. Markets await the first interest rate cut with bated breath, so it will be interesting to see the economic reaction once those rate cuts begin feeding through.
“For now, though, the Bank of England has stressed that it is awaiting confirmation that inflation is under control, and even if it were to cut in June, it will only be the beginning of a slow and gradual easing of interest rates. It will be especially worried of triggering any fresh bout of inflationary pressures so will move slowly, even if this does risk being overly constrictive for a prolonged period of time.
“That said, the UK is clearly entering a more optimistic period. The government will be hoping to take advantage of this in the lead up to the general election, however, there are still factors, such as productivity and manufacturing struggles, that will weigh on economic growth for some time.”
