Stronger-than-expected bounce back from last year’s recession could pose a dilemma over the pace of rate cuts.
10 May 2024
A sharp bounce in UK Gross Domestic Product (GDP) over the first quarter of this year, showing 0.6% growth – the fastest in two years - was way ahead of economists’ expectations and confirms the modest recession the UK experienced in late 2023 is over. March monthly GDP of +0.4% alone is a blowout number by itself and points to an economy that has quite quickly moved into positive momentum. The dominant services sector grew by 0.7% and production by 0.8% which more than offset declines seen in construction. While this is good news, the obvious downside with this is that the Bank of England might be less inclined to cut rates into an economy that is growing faster than expected. Inflation and wage growth dynamics will need to slow - and slow fast - to make a June rate cut a distinct likelihood.
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The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is not an indicator for the current or future development.