Analysts Warn UK GDP Growth Could Sustain High-Interest Rates: According to initial figures from the Office for National Statistics (ONS), the UK’s GDP grew by 0.1% in February.
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Assuming preliminary figures reveal the UK exited its technical recession by mid-May, the small month-on-month rise followed 0.3% growth in January.
A boon to Prime Minister Rishi Sunak, who has promised to grow the economy, has been the news. According to his Chancellor of the Exchequer, Jeremy Hunt, the latest data show that the economy is turning a corner and that if we stick to our plan, we will see more growth.
The latest figures suggest a meaningful rise in growth could be some way off, with analysts warning there is little momentum in the economy. Last year, the economy grew 0.1% despite the UK entering a recession in the second half of the year.
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Analysts Warn UK GDP Growth Could Sustain High-Interest Rates
Bloomberg Economics Says … “February’s GDP gain leaves the UK economy on course for a solid rebound in the first quarter of 2024. Even so, we remain of the view that the recovery this year will be subdued enough so as not to endanger the progress made on disinflation so far. That should help the Bank of England deliver its first rate cut as soon as June.”
This is the real story today.:
GDP per Head in UK is 1.1% LOWER than before COVID (Q3 2019)
It’s 2.7% higher in EU
And 6% higher in US – why is UK doing so badly?Growing the economy by growing the population leaves no one better off. https://t.co/tebKNoV1Sn
— Joel Hills (@ITVJoel) February 15, 2024
During February, the UK’s economy grew 1.1%, driven primarily by the production sector. Manufacturing also saw growth, with transport equipment and food and drink production leading the way.
As well as transportation and storage, information and communications, the services sector contributed to economic growth, while wholesale and retail trade, as well as motorcycle and automobile repair, saw marginal declines.
These sectors were affected by wet weather and supply chain disruptions from the Middle East crisis, with 50% reporting that the conflict restricted their activities.
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During the three months to February, construction output declined by 1% and by 1.9% compared to January.
New work declined 3% over the past three months, with infrastructure output down 5.5%. Repairs and maintenance grew 1.6%, but fell 1.4% from January.
It is expected that all figures will be revised by the UK’s official statistics office.
Although February’s GDP growth was welcomed, analysts warn that it may not necessarily translate into good news for all, including mortgage payers, over the short term.
Likewise, Suren Thiru said that the longer-term outlook remains challenging, but the increase in GDP may give rate setters sufficient reassurance to maintain interest rates.
US inflation warnings sparked concerns the Federal Reserve would raise interest rates on the other side of the Atlantic significantly.
According to Sanjay Raja, chief UK economist at Deutsche Bank, inflation is dropping as fast as a stone, boosting household spending and business investment.
Inflation and wage growth will determine when the Bank of England cuts interest rates, says ING Economics’ James Smith.
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