Hunt insists plan to convey inflation down is working regardless of 4 per cent improve
Britain is trapped in a cycle of decline and Rishi Sunak’s pledges to spice up the economic system at the moment are “in tatters”, Labour’s shadow chancellor Rachel Reeves has warned, because the UK fell into recession.
The Workplace for Nationwide Statistics (ONS) revealed on Thursday a 0.3 per cent decline in gross home product (GDP) between October and December 2023.
The gloomy official figures imply the economic system entered a technical recession, as outlined by two or extra quarters in a row of falling GDP, for the primary time since amid the pandemic within the first half of 2020.
The information offers a blow to the prime minister, who has promised to develop the economic system as certainly one of his 5 priorities, particularly after most economists had been solely forecasting a 0.1 per cent decline in GDP.
In feedback Labour steered had been “out of contact”, chancellor Jeremy Hunt mentioned low financial development is “not a shock”, however added that the UK should “follow the plan – slicing taxes on work and enterprise to construct a stronger economic system” regardless of robust occasions for a lot of households.
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UK technically in recession final yr, statistics set to disclose
Welcome to our dwell weblog on the UK economic system.
The UK is believed to have slipped into recession on the finish of final yr after a weak December for the nation’s economic system, official figures are set to indicate.
The Workplace for Nationwide Statistics (ONS) is predicted to disclose that the UK economic system contracted for the second quarter in a row within the last three months of 2023.
Most economists are forecasting a 0.1% decline in gross home product (GDP) between October and December.
This could comply with a 0.1% contraction within the earlier three months, after a downward revision towards the zero development initially estimated.
A contraction within the fourth quarter would imply the UK tipped right into a technical recession, as outlined by two or extra quarters in a row of falling GDP.
The Financial institution of England has held rates of interest at 5.25% 4 occasions in a row.
Jane Dalton14 February 2024 18:26
Economic system thought to have been weak final yr
Official figures for the fourth quarter of final yr are additionally anticipated to indicate that the economic system was weak final yr as a complete.
ONS estimates recommend it didn’t develop in any respect between April and June, earlier than shrinking between July and September, which has left the UK liable to recession within the last three months.
Jane Dalton14 February 2024 18:37
Economic system is flat at finest, says Financial institution chief
Financial institution of England governor Andrew Bailey has signalled {that a} recession, if confirmed, can be more likely to be transient, telling a Lords committee on Wednesday the economic system was starting to select up.
Mr Bailey instructed the Home of Lords Financial Affairs Committee: “In our February Financial Coverage Report, it was within the steadiness – we didn’t have a recession within the forecast, however it’s at finest flat, within the view we took.
“It wouldn’t take a lot to tip it both method, frankly.
“Going ahead – and I feel that is in some methods extra vital – we at the moment are seeing some indicators of the start of a pick-up in among the surveys, for example … we’ve obtained a modest pick-up this yr which continues thereafter.”
Jane Dalton14 February 2024 19:20
Inflation surprises consultants by holding regular
UK inflation defied expectations to carry regular at 4% in January as decrease meals costs helped offset will increase in power prices, official figures present. Economists had anticipated an increase to 4.2%:
Jane Dalton14 February 2024 20:30
Employees ‘set to profit from tax lower and wage development’
Employees are more likely to begin feeling higher off regardless of a short-lived recession, say consultants.
Ellie Henderson, an economist at Investec mentioned: “Our base case is that the economic system most likely did tip right into a recession, though this might be within the mildest of senses: a greater description of the development is likely to be stagnation.”
Investec is pencilling in a 0.1% contraction within the fourth quarter, with weak retail knowledge dragging on the all-important providers sector and resulting in a 0.3% fall in output in December.
Ms Henderson added: “In all, we anticipate that it was a troublesome finish to the yr for the UK economic system, however 2024 is more likely to have gotten off to a greater begin as family budgets look to have loosened slightly.
“Certainly, the decline in inflation mixed with nonetheless excessive wage development will proceed to drive actual family disposable incomes larger, a key issue behind the anticipated restoration this yr.
“There will even be the added carry to post-tax incomes from the 2p lower to staff’ Nationwide Insurance coverage Contributions, efficient from January 6 – and, in all chance, extra to come back within the March Finances.”
Jane Dalton14 February 2024 22:00
London shares soar
Shares in London soared on Wednesday after new official inflation figures had been decrease than economists had anticipated, growing the possibility of a Financial institution of England charge lower in months to come back.
The FTSE-100 rose 56.12 factors, or 0.75%, ending the day at 7,568.4, as retailers and housebuilder Persimmon joined the bottler of Coca-Cola near the highest of the index.
The inflation charge was 4% in January, the identical because the month earlier than, however merchants celebrated as a result of economists had anticipated an increase to 4.2%.
“The previous 24 hours have been filled with surprises, and this morning’s UK inflation knowledge actually caught markets on the hop,” mentioned Chris Beauchamp, chief market analyst at on-line buying and selling platform IG.
“Fast deceleration in worth development has hit the pound arduous, because it appears a Financial institution of England charge lower has grow to be a more likely occasion within the first half of the yr.
“This has helped the FTSE-100 to outperform different indices as we speak, although in fact it lags far behind on a longer-term view.”
Jane Dalton14 February 2024 23:00
UK more likely to have slipped into recession, consultants say
Jane Dalton15 February 2024 00:01
Britain to undergo highest inflation in G7, says OECD
Jane Dalton15 February 2024 01:00
From inflation to development, how Sunak is doing on his 5 pledges
Jane Dalton15 February 2024 02:00
Inflation anticipated to drop, says Financial institution chief
A technical recession could additional add to the case for an rate of interest lower, with the Financial institution of England already indicating it’s extra a case of when, not if, a discount will come.
Financial institution of England governor Andrew Bailey mentioned that inflation remaining unchanged “leaves us broadly the place we thought we had been going to be”.
Requested whether or not he thought the UK might be caught with inflation at its present 4% degree, he reiterated that the speed was anticipated to return to the two% goal by the spring, in accordance with its personal forecasts.
“It appears to be like like we’re going to have fairly a leg down between now and April-Could time,” he mentioned.
Jane Dalton15 February 2024 03:30