By Paul Hyland – Chartered Wealth Manager
- UK recovery remains strong
- Consumer spending helps to drive economic growth
- Business investment falls amid falling oil prices
- Bank of England predicts 2015 will deliver fastest rate of growth in nine years
- UK employment at all time high
- UK inflation at all time low, driven by falling fuel and food prices
UK Economic Review
The second official estimate for Q4 2014 GDP confirms an economic growth rate of 0.5%, which is the slowest since the end of 2013. Despite the recent easing in growth, these figures confirm that the UK’s recovery remains strong.
Exports have played a major role in driving the growth, with the UK’s trade balance deficit (exports minus imports) narrowing from £13.1 bn to £10.4 bn. Consumer spending continues to help power growth, rising by 0.5% in Q4, the fourteenth consecutive quarter of growth.
UK business investment fell by 1.4% in Q4, the second successive quarterly fall and the biggest drop since 2009. This can be attributed, in part to weaker investment by the oil and gas industry amid falling oil prices. More needs to be done to promote business investment and achieve balanced growth.
The Bank of England expects the economy to grow at a faster rate this year with a forecast of 2.9% which, if achieved, would be the fastest rate of growth for nine years. These views are supported by a strong jobs market with employment rising to 30.9 m, the highest number since records began. However, the youth unemployment rate remains at three times the national average.
Inflation fell from 0.5% to 0.3% in January 2015, the lowest rate since records began, and the thirteenth successive month below the bank of England’s 2% target. The slowdown has been driven by falling fuel and food prices.
Overall the UK economy looks strong. However, the recovery still faces several obstacles, intensified by political and economic uncertainty. More must be done to support long-term business investment in particular if the UK is to remain among the fastest-growing countries in the G7.
Global Investment Outlook
US equity markets ended the month on a downbeat note with the healthcare sector driving growth amid a flurry of corporate deals.
European equities advanced well in March with the sector benchmarks gathering momentum and performing above expectations.
In the bond market strong US employment data sparked a bond sell of and the ECB quantitative easing programme began.
Emerging equity markets drew comfort from positive comments from the US federal Reserve and Hopes grew that Chinese policy makers will respond to disappointing economic news. Major emerging market currencies have fallen, apart from the Russian rouble.
The information in this email does not constitute advice or a recommendation and investment decisions should not be made on the basis of it.