Global stock markets have had strong gains to date in 2024 as inflation has continued to subside. In the US, the Dow Jones Industrial Average, S&P500 and Nasdaq Composite all hit new record highs this month.
The annualised rate of Consumer Price Inflation (CPI) in the US eased from 3.4% in December to 3.1% in January, but nudged back up to 3.2% in February. Minutes from the January meeting of the Federal Open Market Committee suggested that policymakers remained cautious about the risks of “moving too quickly” to cut rates, preferring to wait until they have “greater confidence that inflation is moving sustainably toward 2%”.
The UK economy slipped into recession during the final quarter of 2023: having contracted by 0.1% in the third quarter, it shrank by 0.3% during the final three months of the year, dampened in part by weakness in manufacturing and in consumer-facing services. Over 2023 as a whole, the UK economy grew by only 0.1%. Nevertheless, Bank of England (BoE) Governor Andrew Bailey highlighted “distinct signs of an upturn”, suggesting that “this is the weakest (recession) by a long way”.
The Office of Budget Responsibility (OBR) now predicts growth for the UK economy of 0.8% this year, 1.9% in 2025 and 2.0% in 2026.
UK CPI fell from 4% in January to 3.4% in February, fuelling speculation that the Bank of England may start to reduce its base rate as early as May. The rate was held at 5.25% for the fifth successive time at the March meeting of the Monetary Policy Committee (MPC).
The largest eurozone economy of Germany is assumed to be in recession, with negative growth expected for the first quarter following a contraction of 0.3% in the final quarter of 2023. Germany’s manufacturing sector was particularly dependent on Russian gas, and pivoting away from this has been a painful process. The February inflation rate in the eurozone was 2.6%, down slightly from 2.8% in January.
In Japan, the Nikkei 225 Index reached a new closing high during February, finally surpassing its previous peak set in December 1989. The economy narrowly avoided recession, as the growth figure for the final quarter was revised upwards to 0.4%. The Bank of Japan raised its key interest rate to a range of 0-0.1%, the first time the rate has been positive since 2016.
Closer to home, recent data from the Northern Ireland Statistics & Research Agency (NISRA) showed that the NI economy contracted during the final quarter of 2023, largely due to a reduction in output from the service sector. This sector, which includes a broad range of activity including retail, hospitality and business services, accounts for just over half of local economic output.
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