The UK economic system inched up barely within the final quarter of 2024, forward of market expectations. Nevertheless, the nation remains to be coping with slower progress than a few of its different G7 friends.
The UK economic system grew by 0.1% within the final quarter of 2024, in line with the Workplace for Nationwide Statistics. The determine was This was above analyst expectations of a -0.1% fall and higher than the earlier quarter, which was stagnant.
The determine, though small, is cheering information for the UK’s Labour authorities, which is insisting that its focus stays on financial progress. Nevertheless, the UK economic system remains to be coping with comparatively slower progress than a few of its different G7 counterparts.
The fourth quarter’s progress was primarily pushed by a lift within the companies sector, which grew by 0.2%, in addition to the constructing business, which rose by 0.5%.
Then again, manufacturing dropped for the fifth consecutive quarter, falling by 0.8%, primarily due to a 0.7% slowdown in manufacturing. The prescribed drugs, transport tools, quarrying and mining sectors additionally skilled declines.
Equally, exports fell 2.5%, though a 2.1% improve in imports – primarily boosted by non-monetary gold – went a way in direction of offsetting the autumn.
On an annual foundation, the UK economic system superior 1.4% within the fourth quarter of 2024, up from 1% within the third quarter, in addition to market estimates of 1.1%. This was the quickest GDP progress because the fourth quarter of 2022, primarily supported by an increase in family consumption and authorities spending.
Market and analyst reactions to UK GDP outcomes
The FTSE 100 fell 0.82% on Thursday morning, following the discharge of the UK GDP figures, with the FTSE 250 additionally dropping 0.20%.
Kyle Chapman, FX markets analyst at Ballinger Group, stated in an e-mail observe: “The UK expanded by a stronger-than-expected 0.4% in December, lifting the This fall progress determine into constructive territory relatively than the contraction anticipated by the market consensus. A surge within the companies sector supplied a lot of the increase.
“Little question Reeves can be taking a sigh of reduction right here – a shrinking economic system will not be a perfect headline for a authorities whose overarching purpose is larger progress – however the UK will not be out of the woods but.
“Which facet of zero that the expansion figures land on is much less vital than the truth that the economic system is flatlining. Low progress and excessive charges are a poisonous combine for the Treasury. At present’s shock won’t change the truth that the OBR projections in March are going to level to evaporated fiscal headroom. Which means troublesome selections are nonetheless to come back, and companies didn’t take the final ones very nicely.”
David Morrison, senior market analyst at monetary companies supplier Commerce Nation, additionally stated in an e-mail observe: “This better-than-expected quantity has come as a reduction each to monetary markets and the federal government. The very last thing wanted at this stage was a quarterly dip into unfavourable territory.
“However, the UK economic system continues to trundle together with little proof of progress, though the month-on-month information is encouraging. Sterling jumped on the information, whereas the pre-market FTSE 100 was holding close to all-time highs.”
Danni Hewson, head of economic evaluation at AJ Bell, additionally identified in an e-mail observe: “Even this miniscule scrap of progress can be a reduction for the Treasury, which may have been coping with a really totally different set of headlines this morning.
“The economic system is hardly in good well being and one other quarter bumping alongside the underside will not be the expansion the federal government has promised. In reality once you examine the UK economic system with that of different G7 international locations the UK wasn’t on the entrance of the pack in 2024, it was caught someplace within the center with Germany and Italy mentioning the rear.
“There’s at all times the likelihood that these figures might be revised however proper now it seems to be just like the UK has dodged the boldness sapping label of a technical recession. After a bruising Finances and a halving of progress forecasts by the Financial institution of England, any bit of fine information must be celebrated, and the federal government has shifted tack during the last month or so with backing for large infrastructure tasks like Heathrow’s third runway placing meat on the bones of the chancellor’s progress plans.”
Nevertheless, Hewson highlighted that though rates of interest are dropping, it will nonetheless take a while for this lower to trickle right down to households and be mirrored in shopper spending.
UK experiences commerce surplus with US in 2024
In 2024, the UK recorded a commerce surplus with the US, together with Puerto Rico, exporting £58.7bn (€70.4bn) price of products, whereas imports got here as much as £56.6bn (€67.8bn). This has elevated hopes that the UK might be able to sidestep any potential tariff actions from the US.
The highest most imported items from the US have been crude oil, mechanical energy mills, refined oil, medicinal and pharmaceutical merchandise and aircrafts. Then again, a few of the prime most exported merchandise to the US have been vehicles and scientific devices.
Samuel Edwards, head of dealing at world monetary companies agency Ebury, stated in an e-mail observe: “Evaluation of at this time’s commerce information exhibits that 2024 noticed the UK holding a £2.1 billion (€2.5bn) commerce in items surplus with the US. The small measurement of the excess, particularly as compared with lots of the United States’ buying and selling companions, is more likely to help hopes from the Authorities that the UK can minimise or keep away from any potential tariffs imposed by President Trump.
“We’re already seeing the impacts of the 25% metal and aluminium tariffs on our consumer base, forcing troublesome conversations about employees and manufacturing prices. Any additional measures may see the ache unfold into different key sectors within the UK at a time of financial uncertainty and stuttering financial progress.
“On this fraught setting, we’d urge companies to contemplate implementing strong hedging methods to minimise their FX threat publicity, and to make sure prepared entry to finance to climate any storms, whether or not they be home or from abroad.”