Morning Call: Sun’s out, GDP’s out

What Westminster isn’t telling you about our GDP figures.

Will

Good morning. Will here. Jeremy Hunt will be basking not only in the sunshine today but also in the warm glow of the latest GDP figures, which show the UK economy leaving its technical recession behind with 0.6 per cent growth in the last quarter. The Chancellor says this shows the economy “returning to full health” and that “our long-term prospects are the strongest of any major European economy”. Rachel Reeves says this is the UK going from “low growth to no growth”. Who’s right?

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The first quarter of 2024 saw the fastest economic growth for two years, comfortably beating the Bank of England’s prediction yesterday that GDP would grow by 0.4 per cent in the first quarter of this year.

As for the difference of opinion between Hunt and Reeves, “the reality is that both of them are talking bollocks”, says Simon French, chief economist at the investment bank Panmure Gordon and one of the few economists to correctly predict the stronger growth revealed today. “Are we bottom of the pile, as Rachel likes to pretend? No. Are we world-beating, as Jeremy’s Twitter account likes to pretend? No.” In international terms the UK has moved from fourth to third place in the G7 for GDP, and remained at fifth place for per-capita GDP. “We’re in the middle of the pack.”

French says the Bank of England’s more pessimistic prediction was based on the idea that the large rise in “precautionary savings” last year would continue to rise, whereas he thinks it will fall – people will start to spend more, and that higher consumption will contribute to economic growth. This appears backed up by consumer confidence, which recently hit a two-year high.