Whatâs going on here? Data out on Wednesday showed that the British economy picked up in January, which should hopefully change the tone after last yearâs recession. What does this mean? The UK had maintained a characteristically stiff upper lip for months, despite inflation and high interest rates making it harder for Brits to spend money and spur on the economy. Not even a library worth of stoicism books couldâve stopped the country from slipping into a recession at the end of last year, though. Yet, Britainâs services and construction sectors kept plodding on, so much so that the economy grew by 0.2% in January from the month before, keeping pace with predictions. Thatâs a welcome relief after Decemberâs 0.1% decline from the month before. Even more importantly, it puts the UKâs economy on track to grow this quarter, wiping the slate clean after that mild recession. Why should I care? For markets: The crystal balls arenât clear. Tuesdayâs jobs data showed that British wages picked up at a slower-than-expected pace between November and January versus the same time the year before, while unemployment ticked up a little. That bodes well for inflation, encouraging traders to up their bets on the Bank of England cutting interest rates this year. Mind you, with Januaryâs data showing that the economy can handle high rates for now, the central bank might not bother taking the risk by loosening the reins on inflation. The bigger picture: Slowly, not surely. Even though Britain showed a bit of gusto in January, the economy was still 0.3% smaller than at the same time last year. Now, plenty of forecasters think rising wages, easing inflation, and lower interest rates will give the economy a nudge this year. That said, the same number crunchers still expect the UK to trail behind France, Italy, Japan, the US, and Canada, even with the wind blowing in the right direction. |