The latest UK growth figures are significant, not because they indicate a boom, but rather a return to a normal rate of growth. The UK is currently growing at the joint fastest rate in the G7, alongside Canada, surpassing countries like France, Germany, Italy, Japan, and the United States. However, this level of growth is considered robust given the sluggish economic performance in recent years.
The UK economy has shown remarkable resilience in the face of various shocks, including near-zero interest rates for 15 years followed by sharp increases over the past year, resulting in the highest levels in 16 years. The hope is that this positive start to 2024 will create momentum throughout the year, boosting business and consumer confidence.
Although inflation is expected to fall back to the normal target level of 2%, the strengthening growth numbers may reduce the likelihood of an interest rate cut in the near future. Nevertheless, many households continue to feel the impact of rising prices, despite signs of improvement in per capita GDP for the first time in two years, which still remains below pre-pandemic levels.
As the UK economy transitions towards a more normal state, there is a mix of reactions among households. Some may appreciate the turning point after years of subdued growth and declining living standards, while others may remain frustrated by the lingering effects of the pandemic and energy crisis. Overall, if sustained, the return to a more stable economic environment is a positive development.