The economic data giving the chancellor a headache…
While the 2.8% inflation figure will bring a boost to the chancellor before she delivers her spring statement, there’s plenty of other economic data that’s working against her to paint a dismal view of the economy…
GDP
Despite Rachel Reeves’ pledge for growth, the economy remains close to stagnation.
Official figures show GDP has barely budged, with a 0.1% rise reported during the final quarter of last year and a contraction of 0.1% recorded in January.
GDP, or gross domestic product, is used to assess the size and health of the economy.
It measures the monetary value of final goods and services produced in the country over a given period.
Liz McKeown, director of economic statistics at the Office for National Statistics, said: “The economy shrank a little in January but grew in the latest three months as a whole, with the overall picture continuing to be of weak growth.
“The fall in January was driven by a noticeable slowdown in manufacturing, with oil and gas extraction and construction also having weak months.
“However, services continued to grow in January led by a strong month for retail, especially food stores, as people ate and drank at home more.”
Economic forecasts
The UK’s economic forecast was recently downgraded by the Organisation for Economic Co-operation and Development and the Bank of England.
The OECD slashed its prediction of 1.7% growth to 1.4% by the end of the year.
It warned that “further fragmentation of the global economy” was a significant concern amid trade tensions sparked by US President Donald Trump that would likely increase inflation.
The Bank of England made an even harsher revision, saying the economy is now expected to grow by 0.75% in 2025 instead of a previously predicted 1.5%.
Later today, the Office for Budget Responsibility will release its latest forecast, which is widely expected to follow suit.
Here our data and economics editor Ed Conway looks at how much income we are generating in the UK…
Borrowing costs
The government’s borrowing costs have also risen sharply since Reeves’s October budget.
The yield, which is essentially the interest rate charged on 10-year government bonds, is around 4.7%.
The ONS has said public sector net borrowing was £10.7bn in February – £100m more than the same month last year and the fourth-highest February on record.
It was also £4.2bn more than had been forecast by the OBR.
Interest rate
The Bank of England interest rate is 4.5% and its next decision will be made on 8 May.
The markets expect two more rate cuts this year after this morning’s inflation data.
Lower interest rates help to ease pressure on households, businesses and government borrowing.
