MNI INTERVIEW: Boost To UK Consumer As Inflation Slows-ONS

The outlook for the UK economy has brightened from a year ago, as easing cost-of-living pressures boost consumption, though growth is likely to remain subdued in coming months, Office for National Statistics Chief Economist Grant Fitzner told MNI on Wednesday.

"Unusual for an economist I know, but I'm feeling a little bit more optimistic this month," Fitzner said in an interview.

GDP grew 0.2% in January, recovering from a weak December that helped push the UK into technical recession in the second half of 2023.

"At the moment [indicators] are looking reasonably positive. Now that doesn't mean that we're going to see incredibly strong growth this year. Both private sector forecasts and those of the Bank [of England] and the OBR (Office for Budget Responsibility) are looking for a pretty subdued growth outlook in 2024,” Fitzner said. (See MNI INTERVIEW: UK Tax Cuts No Boost To Inflation- OBR's Miles)

"But nonetheless, it's looking a lot better in early 2024 than it was a year ago," he added.

UPBEAT INDICATORS

"There are a few potentially more upbeat indicators. Almost a quarter, actually 22.3%, of businesses are expecting turnover to increase next month,” he said, adding that that was be the highest such score since the data series began in April 2022. The net balance of those expecting turnover to increase minus those expecting a fall was also the highest in the series.

"Alongside that, of course the pattern which we've seen for a while now of real wages picking up, improving household balance sheets after of course that period last year that was where we saw real wages declining putting pressure on households," he said.

Fitzner pointed to more upbeat consumer confidence numbers in recent months, and "a generally more upbeat and optimistic household sector." (See MNI INTERVIEW: Mixed Messages In Feb From UK Consumer - GfK)

"So it does look like as inflation comes down, those cost of living pressures are starting to abate," he said.

"What we haven't seen yet is reductions in interest rates and significant falls in mortgage rates, although there's a general expectation that we'll see that later this year,” he said, adding that that, along with the continuation of a reasonably strong labour market, would help drive housing sector recovery.

RECESSION OVER?

The strong start to 2024 could mean the UK is moving out of technical recession, with Fitzner noting that the first month often "statistically sets the tone" for a quarter. To record another negative quarter of growth, both February and March would need to see a decline in the magnitude of 0.3%, he said.

Potential revisions to Q3 and Q4 data in National Accounts due on March 28 could mean H2 2023's technical recession might not be considered to have occurred anyway, Fitzner noted.