The UK's Lagging Economy Shows Some Signs Of Recovery  

 

• Britain's economy, which had seemed certain to fall into recession in early 2023, has shown some unexpected signs of recovery, raising questions about whether the Bank of England really is about to pause its run of interest rate increases.
• The British central bank signalled on Feb. 2 it was getting close to slowing or pausing its run of interest rate increases after some measures of inflation pressure eased and the economy looked set to go into recession.
• Since then, however, the improvement in the economic data has prompted investors to increase their bets on the Bank Rate, which currently stands at 4.0%, rising to 4.25% next month and 4.5% in May, with a one in three chance of hitting 5% in August.
• Bounces in measures of business activity and consumer confidence and a pickup in tax revenues have led some analysts to upgrade their forecasts for the economy this year, although any growth is likely to be weak. JP Morgan last week raised its projection for gross domestic output growth in 2023 to 0.4% from a previous estimate of 0.1%. That compares with the Bank of England's (BoE) forecast, made in early February, for a contraction of 0.5%.
• Despite the improvement signs, Britain is the only Group of Seven (G7) economy still smaller than before the coronavirus pandemic. Economists say that reflects the pandemic's big impact on the country and the problems relating to Brexit.

(Source: Reuters)