The UK economy portrayed a pessimistic outlook over the final months of 2024 as several green shoots of recovery seen earlier in the year began to stall. This trend was led by weakening GDP growth over Q3 and inflation increasing for the first period since 2022 in October.
At a time when many businesses are looking to 2025 as a year of recovery, the economic outlook at the beginning of the year remains pessimistic, with consumer sentiment declining sharply in January and UK industrial output showing deteriorating trends, with manufacturing slowing and production output continuing to fall year-on-year. Increases in National Minimum Wage and National Insurance have increased the focus on labour costs and compounded the cautious outlook as was reflected by increases in the unemployment rate and continued reductions in job vacancies.
There are some positive signals with supply chain pressures continuing to ease and the Bank of England further reducing its base rate to 4.5%. However, the pace of further rate cuts over 2025 is unclear given persistent local and global economic uncertainty, as well as slowing disinflation. Additional economic uncertainty has been cast by recent announcements by the new US administration on its intention to implement trade tariffs on international trading partners.
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