The UK economy saw a small growth of 0.1% in February, following an upward revision of January’s figure from 0.2% to 0.3%. This marks two consecutive months of growth, which is important as two quarters of consecutive contraction would indicate a recession. Last year, the UK experienced this undesirable streak, but now it seems to be on a path to recovery.
For markets, the focus is on predicting inflation and potential interest rate cuts by the Bank of England. While inflation is expected to reach the BoE’s target of 2% later this year, there is uncertainty around how this will impact interest rates. Traders have reduced their bets on rate cuts in light of recent US inflation data, but some economists still predict up to four cuts. The BoE itself is reevaluating its forecasting model, recognizing the need for more accuracy in decision-making.
On a personal level, UK workers are experiencing a boost in wages that outpaces inflation. This means more disposable income for indulging in luxuries or saving for the future. Additionally, a cut in National Insurance tax this month and falling mortgage rates due to rate cut predictions provide further financial relief. This could lead to increased activity in the housing market as individuals look to take advantage of favorable conditions.