Whatās Going On Here?Data out on Monday showed that the UK economy grew less than expected in February, as the country struggles to shake the side effects of the pandemic. What Does This Mean?The UK mightāve done away with Covid rules, but itās not got the all-clear yet: the countryās carmakers couldnāt get hold of the parts they needed last month, leading the manufacturing sector to shrink 0.4%. And while the absence of restrictions encouraged travel bookings, any gains were largely offset by a fall in healthcare spending as vaccinations and testing tailed off. That meant the services sector ā which makes up 80% of economic output ā grew just 0.2% in February from the month before, while the overall economy grew just 0.1%. Thatās well down on even Januaryās 0.8%, and means the UK economy is now only 1.5% bigger than it was before the pandemic. Why Should I Care?Zooming in: Will the BoE rein it in?
This data doesnāt even take into account the Ukraine war, which has only pushed the cost of living even higher. So while the Bank of England previously suggested itād raise interest rates a few more times this year, some economists are now only expecting them to do it once more next month ā or else risk halting economic growth entirely. Others think itās too late, and reckon the UK economy is bound to shrink this quarter.
Zooming out: Sophieās choice.
Chinaās economy is slowing down too, partly because the country is still insisting on lockdowns. And that zero-Covid policy is finally feeding through to prices, with data out on Monday showing that consumer prices rose at their fastest in three months. That might sound like a familiar story, but remember that China hasnāt been struggling with inflation like other major economies. That's given its central bank room to cut interest rates and motivate growth. But if price rises start to get out of hand, that might not be the case much longerā¦ | 