Economic Monitor
Economic Monitor: UK enters technical recession
The UK entered a technical recession at the end of 2023, according to the latest ONS data. However, there is little new news here, as the data is a continuation of the sluggish and flatline growth following the pandemic bounce back in 2022. There has nonetheless been a rebound in services activity at the start of this year due to improving consumer confidence. If this continues, we expect the ONS to report just a short-lived recession when the Q1 2024 GDP figures are published, in May.
Despite this, recession headlines seen last month continue to dampen consumer sentiment in respect of big-ticket purchases in the near term. However, with the energy price cap falling noticeably in April, lower energy bills will provide some respite for households. Consequently, we may see the annual inflation rate fall below 2% in the coming months.
Continued turmoil in the Middle East has started to feed through to oil prices, and through to prices at UK fuel forecourts. This will provide some compensating upward pressure on inflation, and there are further risks as Russian sanctions loopholes are clamped down upon and conflict continues in Gaza, the Red Sea, and Ukraine. These factors have driven shipping costs higher by 93% (compared to a year ago), and these costs are likely to remain elevated while shipping routes are impeded.
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