UK narrowly avoids recession after economy flatlined
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I’d been out of the country for a while and was shocked by just how downbeat everybody had become.
It was an incredibly tough time for millions as the cost-of-living crisis raged, I got that.
Inflation and energy bills were rocketing, wages and pensions were falling in real terms, and new Chancellor Jeremy Hunt was lining up £55billion of tax hikes and spending cuts.
Things were bad (really bad) but people were talking like it was the end of the world.
There was a serious danger we were overdoing the gloom, and making a bad situation even worse than it was.
So I wrote a piece saying that It’s hard to believe, but there’s actually some good news out there.
And there was.
The UK had just survived a gilt market crisis in the wake of former Chancellor Kwasi Kwarteng’s mini-Budget fiasco, and avoided a run on the pound.
Hunt may have been depressing the hell out of us but at least he was calming markets and preventing a total meltdown.
Mortgage rates were falling, preventing a wave of forced repossessions and massive house price crash.
Savings rates were up (although still well below inflation), the FTSE 100 was holding firm, unemployment was low, sterling was stronger and the black hole in the nation’s finances was closing.
It felt like a turning point to me and today I feel vindicated because there’s more good news out there.
The world’s worst economic forecaster, the Bank of England, spent most of last year warning the UK was facing the longest recession in history.
We now know there was no recession in 2022. Admittedly, we only escaped by the skin of our teeth, but even so.
The threat of a recession this year has now receded, too, with inflation expected to fall by half in 2023 while unemployment remains low.
On Tuesday, latest data showed private sector output hitting an eight-month high, with services and manufacturing also expanding.
The news sent sterling flying. Last autumn, there was talk of the pound hitting parity with the US dollar, with £1 worth $1 for the first time ever.
At time of writing, it’s at $1.21 and climbing.
In yet more good news, the FTSE 100 has just hit an all-time high, breaking through the 8,000 barrier for the first time ever.
Companies listed on the index generate almost 80 percent of their earnings overseas, and these are being boosted by the global economic recovery, and reopening of China after Covid lockdowns.
In April, the state pension will rise by 10.1 percent. If inflation falls to five percent this year as predicted, pensioners will get a real terms increase.
Things are getting better.
Even the Bank of England has cheered up, with Governor Andrew Bailey now admitting his forecasts were too grim and the nation will bounce back faster than he expected.
Let’s hope he’s right for once.
Most of us won’t be feeling any better off yet, with inflation proving sticky and food prices rocketing with talk of shortages, too. Our gas and electricity bills remain shockingly high as a cold snap looms.
Yet there’s good news on that front, too, with wholesale energy prices falling to an 18-month low as Europe weans itself off evil Vladimir Putin’s gas.
This will take time to feed through to home energy bills, although Cornwall Insight predicts that dual-fuel prices will fall from an average £3,295 a year in April to £2,161 from October.
Chancellor Jeremy Hunt has something to smile about too, as January’s healthy tax receipts produced a public finance surplus of £5.42billion.
That’s right, a surplus.
We all hate paying more tax but it’s better than living on the never-never, which will come back to bite us in the end.
There is a long way to go, and I’ve done enough interviews with Express readers to know they are still hurting, especially pensioners scraping by on fixed incomes.
But things are getting better and that’s something to celebrate at least.
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