The UK financial system continues to confound predictions of a recession for now. Nevertheless, the phrases ‘for now’ are doing loads of heavy lifting.
AJ Bell’s Russ Mould mentioned: “Power within the pharmaceutical and automotive manufacturing sectors was a key driver in serving to GDP for the second quarter confound expectations for a interval of stagnation.
“The financial system additionally bounced again strongly in June from a Could interval affected by the additional Financial institution Vacation related to the King’s coronation. Sizzling climate helped pubs and eating places, although a drizzly and cooler July will possible dampen this development when the following month-to-month GDP figures are introduced in September.
“Earlier than we roll out the garlands it’s price observing the UK stays one of many few main economies to achieve its pre-pandemic measurement. It is a story of resilience moderately than dynamism.
“The sturdiness of the financial system is a double-edged sword as it might lead the Financial institution of England to maintain taking a tough line on rates of interest. Given the lagged influence of price will increase, which have already seen borrowing prices improve from close to zero to greater than 5% in slightly over 18 months, this might lead to a extra important downturn in some unspecified time in the future down the road.
“Alternatively, a decrease than anticipated inflation quantity subsequent week might construct confidence in a Goldilocks state of affairs the place the financial system is blowing neither too scorching or too chilly and the Financial institution can begin to dial again the strain on charges and keep away from inflicting way more ache with out risking dropping management of costs once more.”