In the first quarter of 2024, the UK economy grew by 0.7%, according to revised figures released by the Office for National Statistics (ONS). This rate was higher than initial projections for the quarter, which had estimated growth of 0.6%. The revised figures were driven by increased consumer spending, particularly on recreation and culture, as well as housing and food.
The ONS reported that growth in the services sector was a significant contributor to the overall GDP growth. However, growth in manufacturing was revised downward based on additional data. Despite this, household disposable incomes rose in early 2024 due to wage increases, leading to an increase in the household saving rate from 10.2% to 11.1% by the end of the quarter. This was the highest rate since mid-2021 when savings were boosted during the Covid-19 pandemic.
Despite the positive news on GDP growth, many households in the UK may not be feeling better off due to rising prices and high-interest rates. Interest rates are currently at their highest level in 16 years, at 5.25%. The Bank of England has indicated that it may cut interest rates in August, which would be the first reduction in borrowing costs in over four years. However, many mortgage holders have already refinanced at higher costs, and three million more households are set to see their repayments rise in the next two years as fixed-rate deals come to an end.
The UK’s economy has been a central issue in the country’s general election campaign, with growth having been sluggish in recent years. The revised figures for the first quarter of 2024 are likely to provide a boost to the government of the day, whoever that may be following the election. Nonetheless, the challenge of addressing rising prices and interest rates will remain a key issue for policy-makers going forward
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