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UK Positions for Inflation Rebound, GDP Figures Indicate Economic Progress

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By Jerry Walters - - 5 Mins Read
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The United Kingdom's economy has been grappling with numerous issues since the previous year.

Reportedly, the nation's economy plunged into a shallow recession in the past year. But there's some positive news emerging from economists and analysts, as recent GDP figures for January are anticipated to reveal a return to growth.

As per the latest data, experts speculate that the country's GDP will witness a 0.2% growth. Additionally, this growth will be majorly propelled by the resurgence of essential industries/sectors within the country.

2023 Recession Disappearing Very Quickly 

Experts suggest that the UK is making a massive recovery from the shallow recession that hit them in 2023.

According to Rob Wood, the chief UK economist at Pantheon Macroeconomics, the short-term recession is disappearing in the rear-view mirror. However, this wasn't the only statement made by the experts.

Sandra Horsfield, an economist at Investec, highlighted that the service sector is taking the lion's share in the massive improvement. In fact, she believes that the growth of the service sector will automatically translate to a revival in the UK inflation rate and economic woes.

“Underlying all this, we think, is that inflation is falling more rapidly than wage growth… as a consequence, amid a resilient jobs market, households are seeing faster real income growth,” she said.

Moreover, there are already signs backing up these statements. Data shows retail sales figures for January highlighted sales volumes up by 3.4 percent month-on-month. Thus, there was a miraculous recovery from the terrible situation in December 2023. 

More details show investors and companies are becoming more optimistic about conducting business.

According to S&P’s PMI, business confidence hit its highest level since February 2022 in February 2024. Experts believe that the primary driver of the improvement in this metric is the speculations of lower interest rates. 

Inflationary Pressures Are Easing Off Gradually 

It's worth noting that the latest data released by the Office for National Statistics (ONS) offers an important perspective on the UK's current economic situation.

While it's true that the UK unemployment rate has risen for the first time since July, this data also highlights some positive trends. For example, wage growth appears to be easing steadily, which could help to stabilize the economy in the long run.

 

British Union Jack flag flying in front of the Bank of England in the City of London financial center
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Experts were glaringly disbelieving when the unemployment rate climbed to 3.9%, up from 3.8% between January and November.

In addition, the information indicated a significant decrease in average earnings. As a result, pay growth, excluding bonuses, fell from 6.2% in the previous quarter to 6.1%.

These statistics and metrics are apparently a source of relief for the Bank of England, as they will reduce the pressure to implement rate cuts. 

Bank of England to Go Ahead with Rate Cuts 

Victoria Scholar, the head of investments at Interactive Investor, expressed a pessimistic outlook on the latest metrics.

She believes that while there has been some improvement, it may not be sufficient for the Bank of England to proceed with rate cuts.

“Wage growth, although weakening slightly, remains relatively robust, which may not be enough for the Bank of England. The central bank has made it clear it wants to see significant evidence that pay growth is slowing before cutting interest rates. Nonetheless, it still looks like a summer rate cut is on the cards,” she said.

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