Economic Monitor
Economic Monitor: Consumer spending power improves
The UK’s economic performance at the start of 2024 has shown signs of improving momentum. The final estimate of GDP (released last week) confirmed that the UK entered a technical recession at the end of 2023. However, since then, other indicators such as business sentiment and retail sales have improved slightly, suggesting GDP is unlikely to have fallen further during Q1 2024.
The Quarterly National Accounts data also reveal that UK consumers are saving more as real income gains materialise into healthier savings buffers. These gains are expected to continue into Q2 and Q3, bolstered by lower inflation (particularly energy bills) and the cut in national insurance tax taking effect from this month.
Commodity prices have started to trend upward, although so far this has been limited to metals, particularly tin and gold. Oil prices also rose in March, and upward pressure on them is likely to remain, as longer shipping routes require more fuel and Russian refining facilities come under attack. Whilst shipping costs remain 50% higher than at the end of 2023, costs have started to come down, from a peak of 137%, which will ease pressure on businesses. Nonetheless, input costs are expected to remain high and broadly plateau over 2024.
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