UK ONS GDP figures better than expected at 0.6%, but Bank of England ups pressure for rate cuts

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on May 10, 2024
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  • The United Kingdom's Office for National Statistics has released estimates for Q1 GDP figures.
  • The figuers were sunnier than expected, showing 0.6% quarterly growth.
  • However, the results seemed to come with a tacit warning from the ONS: cut interest rates soon.

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This morning, the United Kingdom Office for National Statistics (ONS) released better-than-expected GDP figures for the UK’s first quarterly estimate from January to March 2024.

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The results showed quarterly growth of 0.6% for the nation’s GDP, and year-on-year growth of 0.2%, according to the ONS:

UK gross domestic product (GDP) is estimated to have increased by 0.6% in Quarter 1 (Jan to Mar) 2024, following declines of 0.3% in Quarter 4 (Oct to Dec) and 0.1% in Quarter 3 (July to Sept) 2023. Compared with the same quarter a year ago, GDP is estimated to have increased by 0.2% in Quarter 1 2024.”

This was ahead of estimates for the figures. Yesterday, the Bank of England forecast a 0.4% growth rate for the period in its Monetary Policy Report, while the consensus for many analysts was a 0.2% growth rate.

A ticking time bomb

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The pressure is mounting for the UK to cut interest rates.

Yesterday on May 9th, the ONS released a bulletin entitled ‘Measuring progress, well-being and beyond GDP in the UK: May 2024’.

In the publications, the ONS said that the number of UK inhabitants dissatisfied with their quality of life had increased worryingly, and a main contributing factor to this is the high inflation and the pressure it’s putting on citizens.

The percentage of people reporting low satisfaction with their lives in the UK, has increased to 5.8% in the five years to October to December 2023… Higher inflation has put pressure on household finances, with 21.8% of people in Great Britain finding it fairly or very difficult to get by financially.”

Inflation affecting UK well-being

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The report went on to say that:

When we asked adults in Great Britain what mattered most to their individual well-being, their personal financial situation was the third most often noted theme. Inflation rose by 3.8% in the 12 months to March 2024, down from a high of 9.6% in the 12 months to October 2022. These increases in inflation have put pressure on household finances, and between 13 to 24 March 2024, 21.8% of people in Great Britain said they were finding it fairly difficult or very difficult to get by financially, as shown on our UK Measures of National Well-being Dashboard.”

Despite this, the BoE is still using a lot of incredibly cautious wording regarding rate cuts.

The cutting of rates may be especially important to avoid stagflation later on, if the second half of the BoE’s Monetary Policy Report GDP prediction holds accurate:

UK GDP is expected to have risen by 0.4% in 2024 Q1 and to grow by 0.2% in Q2. Despite picking up during the forecast period, demand growth is expected to remain weaker than potential supply growth throughout most of that period.”

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