12 December 2022
If you are covering the monthly UK GDP estimate for October, please find below a comment from Marcus Brookes, chief investment officer at Quilter Investors:
“Following September’s fall in GDP, the UK’s economic output bounced back somewhat with a 0.5% gain in October, slightly more than expected. In isolation this should be celebrated, but looking at the wider context and the picture for the UK economy remains an unhealthy one as we head into the winter months. GDP fell by 0.3% in the three months to October compared with the three months to July, and given the Bank of England fears the country is already in a recession this is likely to be the picture going forward for some time.
“While inflation is expected to be at or around its peak now, it is proving to be very stubborn and is contributing to a prolonged cost of living crisis. With political factors continuing to play out, energy prices are not going to suddenly fall sharply, while we have also recently entered a fiscally restrained period from the government, with spending cuts accompanying large tax increases. This is going to be an incredibly difficult winter for many people, and with the weather no longer mild for the time of year, the economy could be frozen.
“For investors, however, the path for interest rates is looking a lot clearer than it did just a few months ago and as such a lot of this negative news is already priced in. Rates are expected to keep rising, but not necessarily as high as they once were thought to have to go to. The journey may continue to be bumpy for investors in the short-term while inflation remains present but now is exactly the wrong sort of time for investors to flee from the market and sit in cash. Looking for quality businesses that can not only survive the tough times but thrive as things begin to get a bit brighter into next year and beyond.”
