Analysis: A growing economy and falling energy bills, the stars could be aligning
Britain might narrowly avoid a technical recession, energy prices could be falling , and mortgage borrowing costs might not be as crippling. Sascha O’Sullivan looks at the good news.
Calling astrologers and horoscope fans: what’s the opposite of mercury in retrograde?
Whatever it is, the UK is clearly experiencing it, with an unexpected slate of good news for the economy over the last few days.
The latest is the fact Britain is unlikely to tip into a “technical recession” – two consecutive quarters of negative growth – after the economy grew by 0.1 per cent in November.
The growth was largely put down to the services sector, as people flocked to pubs and bars to watch the FIFA World Cup.
Is it the most British thing to be pulled from the brink by football fans? Maybe the guy who, in the pandemic, put a flare up his bum before the Euro 2020 final was right after all.
Either way, it has tempered expectations this year will be as dire as predicted.
At the same time, city traders are expecting borrowing will peak lower than expected, meaning they’re pricing in predictions the Bank of England will, eventually, stop hiking interest rates.
In November last year, Governor Andrew Bailey and the Monetary Policy Committee expected the cost of borrowing to climb to six per cent. Now it’s set to hit 4.5 per cent, still high since 2008.
All of this is good news for the Treasury, which, as a result of historic levels of debt during the pandemic, is incredibly exposed to higher costs in borrowing.
Chancellor Jeremy Hunt, while still holding his breath, might’ve let out just a little sigh of relief escape his lips as energy bills are also expected to fall, the third piece of good news this week.
The energy price cap, set at £2,000 until April, means the government has to plug the gap between the wholesale price of energy and what households are paying. The fact energy bills are falling, even if still at record levels, is a sign it could cost somewhere in the realm of £10bn less than expected.
I’m not going to say it’s a stronger economy, but its certainly less fragile than expected, and that means Rishi Sunak and Hunt have more room to move.
With Health Secretary Steve Barclay allegedly ready to acquiesce and admit NHS nurses do need to be paid better, it might even mean the very tight knot on government spending could be loosened.
Though, this comes with the caveat that this is extremely early days.
A cold snap, for example, could quickly send the cost of energy up again.
And of course the FIFA World Cup is over, and consumer confidence will have been depressed by months of warnings of an apocalyptic winter.
According to the Office for National Statistics, more people are spending less on on non-essentials than a year ago, and a larger chunk of household bills are being spent on energy bills (no surprises there).
While there are signs in the right direction and, as our economic editor Jack Barnett would say, reasons to be cheerful, I regret to inform you that a crime against humanity was committed with my local Sainsbury’s putting out a whole aisle for Easter eggs and chocolate bunnies (bunnies!) in January.