UK Economic Growth Slows Meaning Room for Rate Cuts

Figures released today by the Office for National Statistics (ONS) has found that UK economic growth measured by Gross Domestic Product GDP (the monetary amount of goods and services produced) increased by just 0.5% pa in the 2^nd quarter.  This was lower than the forecast 0.6% pa.

Real household disposable income (RHDI) was also lower than expected growing at 1.3% pa in Q2 rather than 1.6% pa in Q1.  This shows that higher interest rates have started to bite as well as continued price increases meaning we have less disposable income.

Comment

Last week the Bank of England opted to not reduce interest rates (unlike the Federal Reserve in the USA cutting rates by 0.5% pa) due to stubborn inflation.

Given these were figures for the end of May, it seems likely that Q3 figures will likely show even slower GDP growth and lower RHID giving the Bank of England room for manouver on interest rate cuts in November.

Expect the Bank of England to cut rates by at least 0.25% pa on 7^th November.  It may even be a 0.5% pa cut if the trend towards recession globally continues.