UK – GDP rises in January, BUT….

The jobs market in the UK remains robust but there are more signs of a slowdown. Unemployment increased slightly to 3.9% and the number of people who are economically inactive increased again. Wage inflation also continues to slow and recruitment firm Reed reports that job vacancies have fallen to the lowest in three years.

The UK economy returned to growth in January after entering recession in the second half of 2023. Monthly GDP increased by 0.2%, mainly due to a pick-up in services activity. However, growth remains weak. After adjusting for inflation, GDP declined by 0.1% over the three months to end of January. Bank of England governor Andrew Bailey said the UK is close to or at full employment but says the Bank of England does not need to see any deterioration in employment before cutting rates as the risks of wage growth fuelling further bouts of inflation has receded. The data means the outlook for interest rate cuts remains unchanged ahead of next week’s interest rate meeting as sterling fell slightly.

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