abrdn | Preliminary UK GDP data released this morning shows that the economy expanded by 0.1% quarter-on-quarter in the fourth quarter, compared to the expected -0.1%.
Today’s GDP figures, although still very weak in absolute terms, have been much better than expected and may act as a kind of turning point. It is certainly difficult now for the economy to enter a technical recession in the short term. However, it is still very likely that the Office for Budget Responsibility (OBR) will have to drastically lower its growth forecasts, which will increase the pressure on the Chancellor, Rachel Reeves, to comply with its fiscal rules. On the other hand, the forthcoming rise in social security contributions, which will probably have an impact on employment and increase inflation, continues to be an important factor to be taken into account. Therefore, further gradual cuts in interest rates are still likely to occur.
