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Introduction: UK GDP report in focus
good morning.
We will soon find out whether Britain is emerging from the recession it fell into at the end of last year.
At 7am the Office for National Statistics is due to release its first estimates of UK GDP for February, with the city hoping to see signs of growth.
Economists predict that GDP will increase 0.1% During February; following weak developments 0.2% Growth in January. That would increase the chances of the economy growing and ending the recession in the first quarter of 2024.
Reminder: The UK ended 2023 in a technical recession, after the economy contracted slightly in both the third and fourth quarters of last year.
To get out of recession, the economy needs to avoid contraction from January to March (and that The data submission deadline is within one month).
However, bad weather may have weighed on UK growth this year. It is already known that retail sales growth slowed in February when storms kept people at home and rain fell.
With a general election around the corner, the government would welcome any sign that the economic downturn is over.
But financial markets have been less kind to Rishi Sunak this week. The Chancellor’s hopes that people could soon see tax cuts and lower mortgage rates were dampened yesterday when traders rolled back their expectations for a rate cut in 2024.
Citi now expects UK interest rates to be cut by just two quarter points in 2024, with interest rates cut by half a percentage point to 4.75% by December.
Today’s GDP report may not change outlook for rate cuts, explained Danny Hewson Head of Financial Analysis AJ Bell:
UK GDP figures are expected to be tepid, neither too hot nor too cold, and are unlikely to change the Bank of England’s thinking significantly.
“Just a few months ago, markets were betting on the possibility of interest rates falling below 4% here in the UK by Christmas, but now only two rate cuts are priced in. The situation is changing, and investors need to act quickly.”
agenda
-
7am (BST): UK GDP report for February
-
Noon BST: Bank of England releases review of predictive models
-
1pm (BST): India inflation rate for March
-
3pm BST: U.S. Consumer Confidence Index by University of Michigan
important events
Half of consumers “cut back on non-essential spending”
Even if the economy begins to grow again, household finances will still be in dire straits.
Half of consumers have cut back on non-essential spending so far this year, with eating out most likely to be taken out of their budget, a survey revealed this morning.
According to the KPMG Consumer Pulse survey, only 3% of consumers said they were able to spend more on non-essential items in the first quarter, while 52% said they cut back on spending.
The most common type of discretionary spending cut was eating out, cited by 72% of those downsizing, followed by purchasing clothing (62%) and takeout (58%).
Sanjay Raja, chief UK economist at Deutsche Bank, expects UK growth to slow to 0.1% in February due to wet weather and lower energy production.
But he also believes the economy is at a “tipping point” after last year’s shallow recession.
Raja explains:
After matching our January forecast, we expect GDP growth to slow to 0.1% m/m in February 2024 (January-24: 0.2% m/m). What’s causing the slowdown? We believe that worsening weather and lower oil/energy production will limit large fluctuations in GDP. Overall, service activity and industrial production each increased by 0.1% month-on-month, while construction production remained flat month-on-month.
Looking ahead, we believe the UK economy is at a turning point following last year’s short and shallow recession. We expect GDP to rise 0.2% QoQ in Q1-24 and 0.3%-0.4% QoQ for the rest of the year. In 2024 as a whole GDP he expects to increase by 0.5%, and next year he expects to increase by 1.5%.
Introduction: UK GDP report in focus
good morning.
We will soon find out whether Britain is emerging from the recession it fell into at the end of last year.
At 7am the Office for National Statistics is due to release its first estimates of UK GDP for February, with the city hoping to see signs of growth.
Economists predict that GDP will increase 0.1% During February; following weak developments 0.2% Growth in January. That would increase the chances of the economy growing and ending the recession in the first quarter of 2024.
Reminder: The UK ended 2023 in a technical recession, after the economy contracted slightly in both the third and fourth quarters of last year.
To get out of recession, the economy needs to avoid contraction from January to March (and that The data submission deadline is within one month).
However, bad weather may have weighed on UK growth this year. It is already known that retail sales growth slowed in February when storms kept people at home and rain fell.
As the general election approaches, the government will welcome any signs that the economic downturn is over.
But financial markets have been less kind to Rishi Sunak this week. The Chancellor’s hopes that people could soon see tax cuts and lower mortgage rates were dampened yesterday as traders rolled back their expectations for a rate cut in 2024.
Citi now expects UK interest rates to be cut by just two quarter points in 2024, with interest rates cut by half a percentage point to 4.75% by December.
Today’s GDP report may not change outlook for rate cuts, explained Danny Hewson Head of Financial Analysis AJ Bell:
UK GDP figures are expected to be tepid, neither too hot nor too cold, and are unlikely to change the Bank of England’s thinking significantly.
“Just a few months ago, markets were betting on the possibility of interest rates falling below 4% here in the UK by Christmas, but now only two rate cuts are priced in. The situation is changing, and investors need to act quickly.”
agenda
-
7am (BST): UK GDP report for February
-
Noon BST: Bank of England releases review of predictive models
-
1pm (BST): India inflation rate for March
-
3pm BST: U.S. Consumer Confidence Index by University of Michigan
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