Markets optimistic thanks to UK being driven out of recession

(Alliance News) - Markets were pleased on Friday, thanks to data showing that the UK is due to come out of recession.

However, when the Bank of England will cut interest rates remains contentious.

"Any growth is good news and certainly the UK seems to be trudging slowly out of last year's short-lived recession," said Danni Hewson at AJ Bell.

According to the Office for National Statistics, UK gross domestic product rose by 0.1% in February from January, in line with FXStreet cited consensus. UK GDP had expanded 0.3% on-month in January, according to upwardly revised data.

"These figures mean the UK economy is likely to have expanded in the first quarter overall, marking an end to recession," said Sophie Lund-Yates at Hargreaves Lansdown.

Data in March showed that the UK slipped into a technical recession in the fourth quarter of 2023.

UK gross domestic product slumped 0.3% in the three months to December from a quarter earlier, unchanged from initial ONS numbers provided in February.

The UK economy had declined 0.1% quarter-on-quarter in the third-quarter of 2023. It means the UK has entered a technical recession at the end of last year, which is generally defined as two successive quarterly falls in gross domestic product.

Yet, on Friday, Lund-Yates said: "With that said, the levels of growth being displayed aren't very inspiring, particularly for our large services industry."

Further, Richard Hunter at interactive investor said that Bank of England "remains between a rock and a hard place", with "anaemic" growth paired with inflation still above the bank's target.

It was only on Thursday that BoE rate setter Megan Greene said interest rate cuts "should still be a way off" in the UK, predicting that the "last mile" in getting inflation down "may prove the hardest".

Greene, one of the more hawkish members of the BoE's monetary policy committee, argued in the Financial Times that investors had underestimated the risk that inflation would remain high for longer in the UK than in other advanced economies.

By Sophie Rose, Alliance News senior reporter

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