- UK economy grows by 0.6% in the first quarter, leaving recession behind.
- Output grows by 0.4% in March 2024, following growth of 0.2% in February 2024 (revised up from 0.1% earlier forecast).
- The FTSE 100 sets new records on the open, soaring above 8400, amid the positivity.
- The stronger-than-expected GDP output reading lifts sterling further above $1.25.
- Brent crude heads above $84 a barrel on Middle East supply concerns.
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’The UK economy has jogged out of recession, picking up pace more than expected. It’s clear a corner has been turned, as intense cost-of-living pressures subside, and consumers and companies eye lower borrowing costs on the horizon. The 0.6% growth registered in the first three months of the year was higher than forecast, with the green shoots seen in January and February flowering into a stronger growth spurt in March. Confidence breeds more optimism, and with the economy showing signs of repairing and the FTSE 100 rallying higher, the glass half full sentiment is settling in. The blue-chip index has powered higher in early trade and set fresh records, after a sheen of positivity has descended on the UK.
The huge services sector sprang back to growth after three back-to-back quarters of contraction, with the transport and storage sector, powering ahead by 3.7%. The manufacturing sector also saw a growth upswing of 1.4%, led by transport equipment and metals production. But activity remains weak in construction, with output falling 0.9% as building sites have turned quieter and homeowners put off work, amid high borrowing costs, with private commercial new work down 5.3%. It’s still super-tough for pockets of the services sector, particularly for companies in the creative arts and entertainment industry, where output fell 8.8% in March.
The pound has been in a zig-zag pattern since the mood changed around the table at the Bank of England and a summer interest rate cut was priced more firmly back in. But weaker than expected jobs data in the US, has pulled forward expectations for an earlier move by the Fed too, pushing sterling back up. The release of the latest snapshot of output, saw the pound gain fresh ground, heading above $1.25, amid some expectations that this better performance could make policymakers at the Bank of England hold off from cutting rates in June, with August looking more of a possibility.
As Israel continues to attack targets in the city of Rafeh in Gaza and hopes of a ceasefire agreement slip away, it has led to fresh concerns about the seemingly intractable conflict in the middle east. Oil prices have headed higher on supply concerns in the region with Brent Crude trading above $84 a barrel. Traders also have their eye on what appears to be an improving global trade outlook. Chinese export data came in better than expected on Thursday, then came the jump in weekly jobless clams in the United States fuelling hopes of rate cuts this year, while UK GDP has also surprised on the upside.’’
