From 19m ago
Introduction: UK GDP report in focus
Good morning.
We’re about to learn whether the UK is climbing out of the recession into which it slipped at the end of last year.
At 7am, the Office for National Statistics will release its first estimate for UK GDP in February, and the City are hoping to see signs of growth.
Economists predict that GDP rose by 0.1% in February; a weak expansion, following 0.2% growth in January. That would raise the chances that the economy grew in the first quarter of 2024 – which would end the recession.
Reminder: The UK ended 2023 in a technical recession, after shrinking slightly in both the third and fourth quarters of last year.
To escape recession, it needs to not shrink in January-March (and that data is due in a month’s time).
Bad weather may have weighed on UK growth this year, though. We already know that retail sales growth slowed during a wet February, when storms kept people at home.
Any signs that the downturn is over would be welcomed by the government, with a general election close.
But the financial markets are not being very kind to Rishi Sunak this week. The PM’s hopes that the public might see lower taxes and cheaper mortgages soon have weakened, as traders scaled back expectations of interest rate cuts in 2024 yesterday.
The City now expects just two quarter-point cuts to UK interest rates in 2024, which would lower rates by half a percentage point to 4.75% by December.
Today’s GDP report may not change the outlook for rate cuts, explains Danni Hewson, head of financial analysis at AJ Bell:
UK GDP figures are expected to be tepid, not too hot or too cold, and unlikely to do much to change thinking at the Bank of England.
“Where just a few months ago markets were betting rates here in the UK could fall below 4% by Christmas now only two cuts are being priced in. The sands are shifting and investors are having to be fleet of foot.”
The agenda
-
7am BST: UK GDP report for February
-
Noon BST: Bank of England to publish review of its forecasting models
-
1pm BST: India’s inflation rate for March
-
3pm BST: University of Michigan’s index of US consumer confidence
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Even if the economy is growing again, households are still struggling.
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Half of consumers have cut back on their non-essential spending so far this year, with eating out the most likely cull from budgets, a survey this morning shows.
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Just 3% of consumers say that they have been able to spend more on non-essentials in the first quarter, with 52% cutting back, according to the KPMG Consumer Pulse survey.
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Eating out was the most common discretionary spending cut, listed by 72% of those who are scaling back, followed by clothing purchases (62%) and takeaways (58%).
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Good morning.
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We’re about to learn whether the UK is climbing out of the recession into which it slipped at the end of last year.
","elementId":"9af15ac0-dee8-4123-8c48-2ae182c26f32"},{"_type":"model.dotcomrendering.pageElements.TextBlockElement","html":"
At 7am, the Office for National Statistics will release its first estimate for UK GDP in February, and the City are hoping to see signs of growth.
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Economists predict that GDP rose by 0.1% in February; a weak expansion, following 0.2% growth in January. That would raise the chances that the economy grew in the first quarter of 2024 – which would end the recession.
","elementId":"193c72f6-c92e-4d34-8031-67f4e7921734"},{"_type":"model.dotcomrendering.pageElements.TextBlockElement","html":"
Reminder: The UK ended 2023 in a technical recession, after shrinking slightly in both the third and fourth quarters of last year.
","elementId":"91a88cb3-32d7-45d3-8009-4e579ac77e43"},{"_type":"model.dotcomrendering.pageElements.TextBlockElement","html":"
To escape recession, it needs to not shrink in January-March (and that data is due in a month’s time).
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Bad weather may have weighed on UK growth this year, though. We already know that retail sales growth slowed during a wet February, when storms kept people at home.
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Any signs that the downturn is over would be welcomed by the government, with a general election close.
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But the financial markets are not being very kind to Rishi Sunak this week. The PM’s hopes that the public might see lower taxes and cheaper mortgages soon have weakened, as traders scaled back expectations of interest rate cuts in 2024 yesterday.
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The City now expects just two quarter-point cuts to UK interest rates in 2024, which would lower rates by half a percentage point to 4.75% by December.
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Today’s GDP report may not change the outlook for rate cuts, explains Danni Hewson, head of financial analysis at AJ Bell:
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\n
UK GDP figures are expected to be tepid, not too hot or too cold, and unlikely to do much to change thinking at the Bank of England.
\n
“Where just a few months ago markets were betting rates here in the UK could fall below 4% by Christmas now only two cuts are being priced in. The sands are shifting and investors are having to be fleet of foot.”
\n
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The agenda
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- \n
-
7am BST: UK GDP report for February
-
Noon BST: Bank of England to publish review of its forecasting models
-
1pm BST: India’s inflation rate for March
-
3pm BST: University of Michigan’s index of US consumer confidence
\n
\n
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Key events
Half of consumers ‘cut back on non-essential spending’
Even if the economy is growing again, households are still struggling.
Half of consumers have cut back on their non-essential spending so far this year, with eating out the most likely cull from budgets, a survey this morning shows.
Just 3% of consumers say that they have been able to spend more on non-essentials in the first quarter, with 52% cutting back, according to the KPMG Consumer Pulse survey.
Eating out was the most common discretionary spending cut, listed by 72% of those who are scaling back, followed by clothing purchases (62%) and takeaways (58%).
Sanjay Raja, Deutsche Bank’s chief UK economist, predicts wet weather and lower energy production will mean UK growth slower in February, to 0.1%.
But he also believes the economy is at a ‘turning point’ after last year’s shallow recession.
Raja explains:
After matching our estimates in January, we expect GDP growth to slow to 0.1% m-o-m in February 2024 (Jan-24: 0.2% m-o-m). What’s driving the slowdown? Wetter weather and lower oil/energy production will, we think, keep GDP from budging very much. Overall, we see services activity and industrial production up 0.1% m-o-m, respectively, with construction output flat on the month.
Looking ahead, we think the UK economy is at a turning point following on from its short and shallow recession last year. We see GDP picking up by 0.2% q-o-q in Q1-24, and pushing to 0.3% – 0.4% q-o-q for the remainder of the year. For 2024 as a whole, we see GDP up 0.5%, rising by 1.5% next year.
Introduction: UK GDP report in focus
Good morning.
We’re about to learn whether the UK is climbing out of the recession into which it slipped at the end of last year.
At 7am, the Office for National Statistics will release its first estimate for UK GDP in February, and the City are hoping to see signs of growth.
Economists predict that GDP rose by 0.1% in February; a weak expansion, following 0.2% growth in January. That would raise the chances that the economy grew in the first quarter of 2024 – which would end the recession.
Reminder: The UK ended 2023 in a technical recession, after shrinking slightly in both the third and fourth quarters of last year.
To escape recession, it needs to not shrink in January-March (and that data is due in a month’s time).
Bad weather may have weighed on UK growth this year, though. We already know that retail sales growth slowed during a wet February, when storms kept people at home.
Any signs that the downturn is over would be welcomed by the government, with a general election close.
But the financial markets are not being very kind to Rishi Sunak this week. The PM’s hopes that the public might see lower taxes and cheaper mortgages soon have weakened, as traders scaled back expectations of interest rate cuts in 2024 yesterday.
The City now expects just two quarter-point cuts to UK interest rates in 2024, which would lower rates by half a percentage point to 4.75% by December.
Today’s GDP report may not change the outlook for rate cuts, explains Danni Hewson, head of financial analysis at AJ Bell:
UK GDP figures are expected to be tepid, not too hot or too cold, and unlikely to do much to change thinking at the Bank of England.
“Where just a few months ago markets were betting rates here in the UK could fall below 4% by Christmas now only two cuts are being priced in. The sands are shifting and investors are having to be fleet of foot.”
The agenda
-
7am BST: UK GDP report for February
-
Noon BST: Bank of England to publish review of its forecasting models
-
1pm BST: India’s inflation rate for March
-
3pm BST: University of Michigan’s index of US consumer confidence