UK GDP Surges In January, US Inflation Remains High

March 13, 2024 23:15

The UK’s economy seems to be returning to the path of growth as a report by the Office for National Statistics (ONS) showed that it expanded in January.

In the US, February’s CPI inflation figure was higher than anticipated backing up Fed policymakers' narrative about having to see strong indications that the economy slows down before moving forward with interest rate cuts.

UK GDP Expands In January

A report by the ONS revealed that the UK economy grew by 0.2% in January boosted by the services and construction sectors. The GDP growth figure was in line with analysts’ expectations. 

Barclay’s economists told CNBC reporters that the GDP figures are “not a hugely positive picture, but it’s ahead of where we were at the end of last year. Industrial and manufacturing have been weak for the last few prints, you’d expect some bounce-back from that in the end. This is good to see, but we’ll have to see it on a more prolonged basis to know that it is something sustained.” 

Commenting on the UK GDP readings, ING economists noted that “we therefore shouldn’t overstate one month’s worth of GDP figures, but we think it is consistent with the gradual recovery in activity that we expect over the coming months. We think the decline in overall fourth quarter GDP, which marked the second consecutive quarter of negative growth and therefore a technical recession, is unlikely to be repeated in the first quarter of 2024.”

US CPI Rises In February

The US consumer price index, a measure of goods and services costs, increased 0.4% on a monthly basis and 3.2%, on an annualised basis, according to the Labour Department’s Bureau of Labour Statistics. Annual headline inflation surpassed expectations leading analysts to believe that the Federal Reserve could delay cutting interest rates. 

The US dollar rose against its competitors right after the inflation figures announcement. Commerzbank’s analysts said that “the decline in inflation in the US is stalling. In February, consumer prices rose by a strong 0.4% from the previous month, both overall and excluding energy and food. Prices for services in particular increased, reflecting rising wage costs. The high inflation rate in January was therefore not an outlier. The data supports our view that the market is overestimating the potential for interest rate cuts by the Federal Reserve.”

ECB Board Members Talk About Interest Rates

European Central Bank (ECB) policymaker, Francois Villeroy de Galhau, said that the central bank is winning the battle against inflation but remains vigilant on that front. Regarding rate cuts, he mentioned that “the consequences we, at the European Central Bank, should draw is probably to cut rates in the spring and I remind you that in France and Europe this is a season that lasts from April to June 21.”

ECB board member, Peter Kazimir, suggested that discussions over an interest rate cut should start but stressed that the board needs more hard evidence on inflation outlook. Kazimir noted that the ECB should wait until June to adjust interest rates and added that rushing the move would not be smart or beneficial.

OPEC: Strong Growth In Global Oil Demand In 2024 And 2025

OPEC stuck to its forecast for relatively strong growth in global oil demand in 2024 and 2025, according to its latest report published on March 12th. "While some downside risks persist, a continuation of the expected momentum from the beginning of the year could result in additional upside potential for global economic growth in 2024. The 2024 and 2025 growth trajectories of India, China, as well as the United States, could exceed current expectations,” was noted in the OPEC report. 

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Miltos Skemperis
Miltos Skemperis Financial Content Writer

Miltos Skemperis’ background is in journalism and business management. He has worked as a reporter on various TV news channels and newspapers. Miltos has been working as a financial content writer for the last seven years.