According to the latest monthly GDP statistics, activity levels in the UK contracted in October, largely due to an unusually large drop in manufacturing activity. In fact, these figures are becoming increasingly useless in determining the state of the UK economy, and assuming that most of the reasons for October’s decline are temporary, the November forecast, which will be published next week, will We can expect some rebound in the numbers. Whether that happens will largely determine whether the UK economy slips into a “technical” recession, following recent data revisions that saw overall GDP fall slightly in the third quarter. The reality is that a few quarters of -0.1% growth is nothing to write home about, if it even happens at all.
Although the job market has cooled, there are so far no signs of widespread job losses that often occur during recessions. We currently believe the UK economy will remain flat until the first half of this year, as positive real wage growth is offset by continued interest rate increases. The Bank of England remains more focused on inflation statistics, and both wage growth and services inflation are likely to remain strong in the short term, so markets are proactively pricing in a May interest rate cut. there is a possibility. A lot will depend on the next few inflation and employment reports, but for now we are sticking with our case for an August rate cut and 100bp easing in H2 2024.