UK Economy avoids recession; Eurozone inflation falls again
The Office for National Statistics has confirmed this morning that the UK economy grew by 0.1% in Q1 this year in addition to Q4 2022. This matches the initial estimate and confirms that the UK has avoided a recession through the winter of 2022.
The report showed that all major sectors of the economy grew. The services sector grew by 0.1% last quarter, whilst the construction sector grew by 0.4% (revised from 0.7%), the production sector grew by 0.1% in addition to a 0.6% growth in the manufacturing. Despite the positive GDP data, the UK economy is still 0.5% smaller than at the end of 2019, today’s National Accounts report shows; with lots of economists still suggesting that UK will still face a recession this year.
Whilst the GDP reading could be deemed somewhat positive, the squeeze on UK households disposable income looks to have intensified at the start of 2023. Real households’ disposable income (RHDI) fell by 0.8% following positive growth of 1.3% in Q4 2022. The ONS also reports that households experienced “simultaneous withdrawals from their deposit accounts and negative secured loans for the first time ever”.
This morning’s house price data was released with an element of surprise as it showed that prices have in fact risen in June – despite the fact they are falling on an annual basis (at the fastest annual rate since 2009). Nationwide have reported that prices had unexpectedly risen by 0.1% for June, with the average price increasing from £260,736 to £262,239 - this news comes as economists had predicted a fall of 0.3% for the month.
In Europe, Consumer Price Index data has shown that inflation across the eurozone has fallen again (and by more than expected) due to falling energy prices (energy inflation dropping to -5.6% from -1.8%) Consumer prices across the euro area rose by 5.5% in the year to June, down from 6.1% in May. That’s lower than the 5.6% which economists had forecasted, but still some way over the European Central Bank’s target of 2%.
Statistics provider Eurostat says that food, alcohol & tobacco is expected to have the highest annual inflation rate in June – at 11.7%, down from 12.5% in May.
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