Key events
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
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7am BST: UK GDP report for February
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Noon BST: Bank of England to publish review of its forecasting models
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1pm BST: India’s inflation rate for March
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3pm BST: University of Michigan’s index of US consumer confidence
