Introduction
The UK economy has shown signs of recovery in the second quarter of 2024, with the latest GDP figures indicating a positive trend. This blog will delve into the recent GDP data, its implications on prices, affordability, and mortgages, and compare the UK’s economic performance with that of the USA. Additionally, we will explore the relationship between the two economies in terms of global investment and liquidity.
UK GDP Figures for Q2 2024
The UK’s GDP grew by 0.6% in the second quarter of 2024, marking the second consecutive quarter of growth. This growth is primarily driven by the services sector, which saw an increase of 0.8%. Compared to the same quarter last year, the GDP has increased by 0.9%.
In terms of expenditure, there were notable increases in gross capital formation, government consumption, and household spending, although these were partially offset by declines in net trade. The implied price of GDP rose by 0.3% in Q2 2024, indicating a slight increase in the overall price level of goods and services produced.
Impact on Prices and Affordability
The rise in GDP has several implications for prices and affordability. The implied price of GDP increased by 2.2% compared to the same quarter last year, suggesting that inflationary pressures are still present. However, the recent interest rate cut by the Bank of England is expected to stimulate economic growth by making borrowing more affordable for households and businesses.
Household consumption has increased as people have more disposable income due to falling inflation and strong wage growth. This increase in consumption is a positive sign for the economy, as it indicates that consumers are more confident in their financial situation.
Effect on Mortgages
The mortgage market has seen increased competition following the interest rate cut by the Bank of England in August 2024. This has led to more favourable mortgage rates for consumers, which is expected to boost confidence in the housing market. However, the ongoing rollover of fixed-rate mortgages throughout 2024 poses a risk to household incomes, as many will need to refinance at higher rates.
Comparison with the USA
When comparing the UK’s GDP growth with that of the USA, the UK shows a slightly lower growth rate. The UK’s GDP grew by 0.6% in Q2 2024, while the USA’s GDP grew by 0.7%. In terms of real GDP per head, the UK saw a growth of 0.3%, compared to the USA’s 0.6%.
The UK and USA are in different phases of their economic cycles. While the UK is experiencing a recovery with modest growth, the USA’s economy is cooling after a strong performance in 2023. This divergence in economic cycles can influence global investment and liquidity, as investors may seek opportunities in economies that are in different stages of growth.
Relationship in Terms of Global Investment and Liquidity
The relationship between the UK and USA economies plays a significant role in global investment and liquidity. The UK’s modest growth and the USA’s cooling economy create a balanced environment for investors, offering opportunities in both markets. The UK’s recent interest rate cut and the USA’s strong performance in 2023 suggest that both economies are working towards stabilizing their growth and managing inflation.
Conclusion
The UK’s GDP figures for Q2 2024 indicate a positive trend, with growth driven primarily by the services sector. This growth has implications for prices, affordability, and the mortgage market, with increased competition and favorable rates expected to boost consumer confidence. When compared to the USA, the UK shows slightly lower growth, but both economies offer opportunities for global investment and liquidity. As the UK continues its recovery, it will be essential to monitor these trends and their impact on the broader economy.
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*Sources:*
– Vanguard vanguard.co.uk/professional/insights
– Intra Private Finance https://intra-pf.com/news/
– CBRE cbre.co.uk/uk-economy-has-likely-reached-a-turning-point
