Summary of the UK Economy(Mar-2024) : Technical Recession
Summary of the UK Economy(Mar-2024)
- Technical Recession; 2 consecutive quarters of recession
- Rising Inflation
- Trade deficit
United Kingdom, the Bank of England's base rate is 5.25% (2024-03-21) and has been frozen five times.
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| Summary of the UK Economy |
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| GDP Projections; Bank of England |
The Bank of England's forecast for UK economic growth is shown above.
- 2022 (actual) : 4.3%
- 2023 (forecast) : 0.3%
- 2024(forecast) : 0.3%
- 2025 (forecast) : 0.8%
We assume the 2023 forecast is nearly realistic, and we also forecast low growth of 0.3% in 2024.
Quarterly economic growth rates for 2023 are shown below.
- 1Q 2023 : 0.2%
- 2Q 2023 : 0%
- 3Q 2023 : -0.1%
- 4Q 2023 : -0.3%
With three and four consecutive quarters of negative growth in 2023, we are characterizing this as a technical recession.
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| CPI Projections; Bank of England |
Looking at the inflation outlook, we expect inflation to stabilize after reaching +4.2% in Q4 2023.
In January 2024, the Consumer Price Index (CPI) stood at 4.0%, down -0.6% month-on-month, indicating that inflation is stabilizing.
While goods prices are stabilizing, services prices are still high, rising from 6.3% (2023-11) to 6.4% (2023-12) to 6.5% (2024-01). Second-round effect inflation from higher food, energy prices, and wages is likely to be high.
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| Unemployment rate; Bank of England |
The unemployment rate remains low, hovering around 4.0%. The employment situation is relatively tight.
As we move into January 2024, we are seeing companies reduce job openings, which could lead to a higher unemployment rate in the future. The UK Office for National Statistics reported that there were 90.8 million job openings in February 2024, the lowest level since July 2021.
Considering the consumer price index (CPI) and unemployment data, a growing number of organizations are predicting a rate cut by the Bank of England around mid-2024.
The Bank of England has stated that it will continue to tighten monetary policy to stabilize prices.
"...Monetary policy is likely to need to be restrictive for an extended period of time."
United Kingdom, Bank of England base rate is 5.25% (2024-03-21), the fifth consecutive rate hike.
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| Composite PMI; Bank of England |
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| Exportation and Importation; Bank of England |
A PMI index is considered to be improving when it is above a threshold of 50. Based on the UK's composite PMI index, we can see that the economy has improved across industries since November 2023.
However, with the exception of services, all other sectors are below 50.0, suggesting that businesses lack confidence in the improvement they are seeing.
Leaving the EU; Since Brexit, the UK has been negotiating new trade agreements with countries that have trade agreements with the EU, and as these are bilateral trade agreements, they are tailored to suit the economic and industrial environment of both countries.
The UK hopes to achieve a stable trade balance through new trade agreements, and is negotiating trade deals that will lead to stable economic growth.
The current UK Prime Minister, Rishi Sunak (Conservative Party leader and Prime Minister), is touting trade agreements as a major accomplishment, but he is facing difficult trade negotiations with key trading partners such as India and Canada.
Due to the longstanding sluggishness of the U.K. economy, many predict that the Conservative Party will be defeated in the next general election.
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