The UK economy grew slightly in February increasing hopes it is on its way out of recession.
The economy grew by 0.1%, official figures show, boosted by production and manufacturing in areas such as the car industry.
The Office for National Statistics (ONS) said that construction was dampened by wet weather though.
This is an early estimate, but signals how the UK, which entered recession at the end of 2023, is faring.
Liz McKeown, director of economic statistics at the ONS, said that looking across the three months to February as a whole, the economy grew for the first time since last summer.
‘Turning a corner’
Chancellor Jeremy Hunt suggested that the new figures were a “welcome sign that the economy is turning a corner”.
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“We can build on this progress if we stick to our plan,” he added.
Growing the economy was one of five key pledges that Prime Minister Rishi Sunak made last year as consumers and businesses were squeezed by higher prices and interest rates.
Labour shadow chancellor Rachel Reeves, however, argued that “Britain is worse off with low growth and high taxes”.
She added: “The Conservatives cannot fix the economy because they are the reason it is broken.”
[BBC]
Most economists, politicians and businesses like to see gross domestic product (GDP) overall rising steadily because it usually means people are spending more, extra jobs are created, more tax is paid and workers get better pay rises.
The official statistics body also revised its previous estimate for gross domestic product (GDP) in January from 0.2% growth up to 0.3%.
In February, output from the UK’s production industry led the economy’s growth, rising by 1.1%, compared to a fall of 0.3% in January.
The construction sector saw output fall by 1.9% though as persistent rain hampered building projects.
The services sector, which includes things like hairdressing and hospitality, also grew a little with public transport and haulage having a strong month.
Yael Selfin, chief economist at KPMG UK, said that February’s overall figures offered a strong signal that the recession, which is defined as when an economy shrinks for two three-month periods in a row, may already be over.
Growth is likely to have been boosted by cuts in National Insurance and slowing price rises, meaning that businesses and households will have more confidence in their finances and therefore spending.
But she added that consumer spending is still fragile and business investment could be dented by uncertainty around a general election.
Andrew Watson says the metal manufacturing firm he works for has seen growth overall [BBC]
Andrew Watson is chief financial officer at Goodfellow, a metal manufacturer based in Cambridge which supplies research and development around the world.
He said last year the firm was hit by disruption from attacks on shipping vessels in the Red Sea and supply chains were tight after the pandemic, “but overall we saw growth”.
“You’ve got this weird mix of the economy not doing so well in terms of GDP and yet we feel like we’ve got opportunities to grow – and we just have to push forward and access those opportunities,” he said.
He suggested that growth in the UK had been “anaemic” since covid, with more opportunities presenting themselves in the United States.
Other countries’ economies have also faced energy price shocks and supply chain delays in the wake of the pandemic driving up costs, as well as the potential knock-on effects from conflict overseas, but the UK has seen growth stagnating for some time.
‘Industries still struggling’
Dr Roger Barker, director of policy at the Institute of Directors, suggested that there were few signs of a “strong” economic reboundin the UK and that some parts of the services industry like hotels and hospitality were still struggling.
Other economists pointed out the impact of previous interest rate rises by the Bank of England was still feeding through to the economy.
Currently, experts are split on when the UK’s central bank may start cutting interest rates over the summer, potentially providing some relief to mortgage-holders and borrowers.
The Bank’s Monetary Policy Committee takes into account a range of economic figures when making its decision on its base rate, although monthly figures such as February’s can be quite volatile and are “unlikely” to do much change to its thinking, said Danni Hewson, head of financial analysis at AJ Bell.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
