What’s going on here?
The UK economy’s tiny uptick in February might have saved it from a major issue.
What does this mean?
The UK economy managed to grow by 0.1% in February, just as expected. That might not sound impressive, but combined with January’s figure being revised from 0.2% to 0.3%, it means the country has grown for two months in a row. That matters: an economy is classed as being in a recession when it shrinks for two quarters in a row, and the UK managed that undesirable run last year. So unless the trend suddenly kicks into reverse, it seems like the country has managed to ditch that hard-to-shake recession.
Source: Office for National Statistics
Why should I care?
For markets: Shine the crystal balls.
Inflation in the UK seems on track to hit the Bank of England’s (BoE) 2% target later this year. Traders can’t decide when that will translate into interest rate cuts, though. After the worse-than-expected US inflation data this week, they reduced their bets to two rate cuts this year for the UK. Yet, some economists still think there could be four. The BoE’s own forecasting skills aren’t much better: a review revealed significant shortcomings on Friday, telling the central bank it needs to redo its model. In fairness, the BoE hasn’t been any less on the mark than other central banks, so it’s no wonder they’re all being cautious about cutting rates on the back of data.
For you personally: Iced coffee and avocado toast, please.
UK wages are now outpacing inflation, so Brits can indulge in little luxuries – or at least, afford the basics with more breathing room. And with the National Insurance tax being cut this month, there will be some extra padding in workers’ paychecks. Combine that with falling mortgage rates, a result of interest rate cut predictions, and there might be a few more house viewings booked in the coming months.
