UK GDP Flat Line Bodes Well For Inflation Next Week

The Office for National Statistics (ONS) has today released UK Gross Domestic Product (GDP) figures for July 2023 to September 2023.  UK GDP neither fell nor grew.

• UK gross domestic product (GDP) is estimated to have shown no growth in Quarter 3 (July to Sept) 2023, following an increase of 0.2% in the previous quarter.
• There was a 0.1% fall in the services sector but offset by a 0.1% increase in construction output and broadly flat output in the production sector.

This follows the Bank of England forecast that the UK will miss a technical recession, but the economy also will not grow until 2025 at the earliest.

Comment

This tells us that the Bank of England will not be surprised if GDP does go negative as they cannot accurately forecast this given external influences from other economies.  That said, flat or virtually no GDP growth will mean inflation falling.

It also gives us an indication that the Bank of England anticipates inflation starting to fall towards the government target on 2.0% pa from next week and through 2024 and that then interest rates are likely to fall in the Autumn 2024 to then allow the economy to grow in 2025.