UK economy escapes recession with fastest growth since 2021, sending FTSE 100 to new high – as it happened

Time to recap….

The UK is officially out of recession after figures showed the economy grew by 0.6% in the first three months of the year.

The Office for National Statistics (ONS) said the period from January to the end of March marked a return to growth after a mild recession in the second half of 2023. It was the strongest rate of quarterly growth since the end of 2021, and a better performance than expected by economists, who forecast growth of 0.4% in the first quarter.

The downturn came to an end after an increase in activity across the services sector, which has flourished since the turn of the year as wages have outstripped inflation, easing the pressure on consumers.

However, forecasters expect the UK to grow slowly this year as high interest rates and last year’s inflation surge continue to take their toll on disposable incomes.

The Bank of England has predicted that a lack of momentum in the economy means gross domestic product (GDP) will grow by only 0.5% this year. The Bank kept interest rates unchanged at 5.25% on Thursday but indicated it may begin cutting them from June.

Economists broadly hailed the pick-up in growth, which suggests the UK economy may do better this year than expected.

Here’s the full story:

And our analysis:

Optimism over economic prospects, and hopes that interest rates will soon be cut, helped to push the UK’s FTSE 100 to a new intraday high of 8455 points today – on track for another strong week.

And in other news:

Over in the City of London today, Standard Chartered has been accused of being complicit in environmental destruction by environmental activists, at its annual general meeting.

A group called the Climate Choir Movement sang a tune called “Fossil Fuels are Trouble”, a reworking of Taylor Swift’s hit “I Knew You Were Trouble”

They say Standard Chartered is complicit in environment destruction and human rights violations in the Philippines and Mozambique.

Here’s a clip from the AGM:

Jo Flanagan, co-founder of the Climate Choir Movement, says:

“Last year we sang at Barclays AGM. In March we occupied and sang in the Houses of Parliament. And today we say to Standard Chartered ‘your standards are twisted’. While they continue to invest in dirty gas and coal, global warming has exceeded temperatures of 1.5 degrees Celsius over a 12-month period.

This is a dire warning to humanity — a warning that some bankers still do not seem to heed.”

Luxury carmaker Jaguar Land Rover (JLR) has reported its highest ever yearly sales and its biggest profit in nearly a decade.

In a sign that JLR’s customers are not cutting back, the auro maker has reported £29bn revenues in the year to March, over a quarter higher than the previous year.

This was driven by record sales of its Range Rover vehicles.

Around 133,000 vehicles had been ordered at the end of the financial year, three quarters of which were for Range Rover, Range Rover Sport and Defender models.

The group’s pre-tax profit hit £2.2bn, the highest amount since 2015, it said.

Customers clearly weren’t put off by a wave of thefts of Range Rovers, which has pushed up the cost of insuring the cars.

Inded, JLR reports that there is strong interest in its Range Rover Electric, with over 28,700 sign ups to the waiting list since opening in December 2023.

Today’s UK GDP report shows that the economy is “finally catchig up a bit”, says Holger Schmieding, chief economist at Berenberg bank.

Schmieding explains:

After years of self-inflicted Brexit turmoil, the UK economy can – from a somewhat depressed level – expand at a pace at least in line with that of its biggest trading partner, the Eurozone. The solid gain in GDP reduces the need for an immediate rate cut.

Schmieding adds that the UK economy has underperformed the US and the Eurozone since the start of the pandemic, telling clients:

The slump in 2020 was deeper and the subsequent recovery levelled off in 2022 even more so than in the Eurozone in the wake of the surge in energy and food prices. The strong Q1 GDP data partly correct an unexpectedly weak finish to 2023

Richard Walker, the executive chairman of Iceland Foods, says it is “immeasurably wrong” of the government to tell people to be grateful the recession is over.

Speaking to Radio 4’s The World At One, Walker explains that consumers are still suffering from the cost of living squeeze, even though the economy is growing.

Walker – who quit the Conservatives last October – says:

My customers are still paying the price of the Truss calamity. Inflation is still baked in and day-to-day living expenses are still very much affected.

We’ve had years of price rises now, and people do feel worse off, because they are.

Walker adds that Iceland recently conducted a survey of 4,000 customers – it found that 94% said conditions are not getting any better. Many cited sub-par public services and unaffortable childcare.

He adds:

I think it’s immeasurably wrong of the government to tell people to feel grateful that we’ve exited recession.

Rishi Sunak has insisted that “things are starting to feel better” and that confidence in the economy is growing after the UK economy moved out of recession, PA Media report.

On a visit to Siemens Healthineers factory in Eynsham, Oxfordshire, Sunak claimed that the Government’s economic plan was working.

Sunak told Siemens workers:

“After undoubtedly a difficult couple of years that the country has had, actually now things are starting to feel better.

“Confidence is returning to the economy and the country, and I hope that you’re starting to feel that too.”

Sunak, and chancellor Jeremy Hunt, were shown Siemans machines at the factory and given a demonstration of the magnet technology being developed at Eynsham.

The UK economy is likely to keep growing at a decent pace during the current quarter, according to the National Institute of Economic and Social Research (NIESR).

They are predicting GDP will rise by 0.6% in April-June, matching the forecast-beating 0.6% expansion reported in January-March this morning.

NIESR say:

The fact that the UK’s GDP growth transitioned into positive territory after experiencing the shallow recession in the second half of 2023 is encouraging. However, the UK economy has largely flatlined following the initial stages of post-pandemic recovery. To escape the low-growth trend into a new and sustained era of high output growth requires structural changes and public investment.

We expect that monthly GDP will continue its momentum in April, growing by 0.1 per cent relative to March, driven by growth mainly in services and production, particularly Agriculture.

Indeed, the S&P Global/CIPS UK services PMI reported an optimistic balance of 55.0 in April up from 53.1 in March. In line with this positive sentiment, we now forecast GDP to grow by 0.6 per cent in the second quarter of 2024, mainly driven by services sectors.

The European Central Bank is poised to start cutting its key interest rates next month, the record of their last meeting show.

The minutes of the ECB’s April meeting, where it left borrowing costs on hold, have been released – and show that policymakers were more confident that the “disinflationary process” was continuing.

This indicates that the ECB’s governing council could vote for a rate cut next month, if new economic forecasts suggest inflation is indeed falling.

The minute say:

Members concurred that the most recent information had broadly confirmed the March staff projections, thus increasing their confidence that the disinflationary process was continuing

At the same time, important new data – including new staff projections – would be released ahead of the June meeting, allowing the Governing Council to make a more comprehensive assessment. While progress had been seen, monitoring the triangle between wages, productivity growth and profits continued to be key. It was seen as plausible that the Governing Council would be in a position to start easing monetary policy restriction at the June meeting if additional evidence received by then confirmed the medium-term inflation outlook embedded in the March projections.

The Bank of England’s chief economist, Huw Pill, is briefing the Bank’s agents now following yesterday’s interest rate decision.

Pill says the Bank has sent a “relatively clear signal” that it is comforted by recent falls in inflation, which do raise the prospect of reducing the amount of restrictive monetary policy in the system.

But, if rates are to be cut, there needs to be sufficient evidence that the downward path of inflation is strong enough to justify it, Pill says.

Pill explains that he is focused on the underlying components of inflation, not the headline rate – which dropped to 3.2% per year in March.

He also suggests it’s “a little ill-advised” to just focus on the June meeting – reminding agents that governor Andrew Bailey said yesterday a June rate cut was neither ruled out nor a fait accompli.

Analysis: It’s better news, but not boom-boom Britain

Larry Elliott

The first quarterly expansion in a year. Recession receding into the rear-view mirror. A stronger performance in recent months than the Bank of England and the City had thought likely. Faster growth in early 2024 than any other member of the G7 group of leading industrial nations.

When you are in as deep a political hole as the current government you seize on any good news, and there was plenty for Jeremy Hunt to choose from in the latest figures from the Office for National Statistics. The figures were proof that the economy was returning to “full health for the first time since the pandemic”, the chancellor said.

Yet when people look back on the early months of 2024 they will probably remember the relentlessly awful weather rather than a time when the economy was cooking with gas. Boom-boom Britain it certainly isn’t.

To be sure, the UK has emerged from recession but the downturn in the second half of 2023 was a much more modest affair than some of the monster downturns of the past 50 years. The hollowing out of manufacturing in the early 1980s was a genuine slump, as was the housing market crash in the early 1990s and the near collapse of the banks in the global financial crisis of 2008.

The bigger picture is that Britain’s growth performance during the current parliament has been extremely weak…..

More here: