4 months ago • 2 mins
What’s going on here?
The UK reported an unexpected growth spurt on Friday.
What does this mean?
When economists peeked into their crystal balls, they didn’t see the UK economy growing an iota last quarter. But surprise, surprise: it seems the Brits actually had a trick up their sleeves. All-important household spending, which had been playing dead, sprang back to life with a 0.7% boost, as folks splashed out everywhere – from transport to dining out. And the manufacturing sector revved up too, with cars driving 1.6% growth, while construction and business investment also pulled their weight. All in all, then, the economy grew by 0.2% last quarter versus the previous one, outpacing the Bank of England’s (BoE) official 0.1% forecast and marking the strongest quarterly growth in over a year.
Why should I care?
The bigger picture: Growing pains.
While the government might be popping champagne, for Mr. and Mrs. Average Joe, it’s a bit more complicated. See, the economy’s pep might make the BoE’s eyebrows shoot up, thinking, “More rate hikes, anyone?” – especially given it could keep upward pressure on wages and prices. That could be a tough dent, given that many households are still bracing for the impact of past rate hikes (think pricier mortgages when it’s time to refinance). Plus, the horizon’s already cloudy. The BoE no longer expects a recession, but its forecast of a two-year economic standstill isn’t exactly a ray of sunshine – especially when the economy is still playing catch-up post-pandemic.
For markets: Britcoin’s booming.
Market mavens are already betting on another rate hike next month, sending the British pound on a little joyride. After all, higher interest rates make a currency more attractive to international savers and investors. That means UK exports might come with a heftier price tag for international buyers – but on the bright side, it might make that imported Chianti or overseas holiday a tad cheaper.
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