00:00 So what does the future hold for Britain's economy? Vicky Price is an international economist and business consultant. Vicky, welcome back.
00:08 Chancellor Jeremy Hunt, the finance minister, suggesting that these new figures were, in his words, a welcome sign that the economy is turning a corner. Is it?
00:19 It is. There's no doubt about that. We did have recession. If you look at the last two quarters of 2023,
00:26 we had drops in GDP, small ones, both in the third quarter and the fourth quarter, which means that we had a technical recession and the economy only grew by 0.1 percent for the year as a whole.
00:36 So nothing spectacular at all in terms of performance.
00:41 What we've seen in the last few months is that there has been a pickup in activity, particularly in the services sector.
00:48 And what is really welcome is that we're also now seeing manufacturing picking up.
00:52 You mentioned the car industry earlier. That's a really welcome sign.
00:57 The car industry was such an important part of the UK economy and it really didn't do very well at all for some time now.
01:03 So it's good news that that is recovering. But of course, the growth still isn't particularly strong.
01:10 What we've seen is growth of 0.3 percent now. It's been upgraded in the first month of 2024.
01:16 You've seen point one in the second month, at least that's growth.
01:21 And you would actually need to see a very spectacular drop in March for that to be reversed.
01:26 So I think, yes, we are out of recession and there should be some positive, even though not very spectacular growth in the first quarter of 2024.
01:35 Presumably everyone in British government is looking for a magic wand or a magic money tree.
01:40 I mean, what needs to be done to convincingly bring the UK economy out of the woods?
01:47 I think certainty of policy is very important. And of course, we're having elections this year.
01:51 There is no doubt that if we get some growth and it's sustained for the next few quarters,
01:58 then that is going to encourage the Conservatives certainly to call the election.
02:03 In fact, the prime minister did say that election would happen when growth happens.
02:08 At least he hinted that that would be the case. So growth is really important.
02:13 But for businesses, what they need is inflation to be sustainably falling, which is very, very important.
02:20 They need interest rates to come down and they need them to come down quite soon.
02:24 And everything has been happening in the US in the last couple of days suggests that perhaps those cuts in interest rates are going to take a little bit longer to come.
02:35 The UK cannot afford to wait really any length of time because interest rates now in real terms are quite high.
02:42 So we do need those two things. Confidence has improved on expectation of those things happening,
02:47 both business confidence and well, consumer confidence is a bit stable.
02:51 But business confidence seems to be improving. So I think those two elements in the economy absolutely need to come, if you like, good.
03:03 And if they happen, then I think we could see perhaps growth pick up a little bit more than what the forecast now suggests.
03:09 And the FTSE 100 at its highest closing level in over a year. Quick thought on that. Why?
03:16 Yes, well, I looked at it where it was. It sort of hoppers for it.
03:20 Does it seem to have come down a little bit? But certainly it did quite well because of that growth data that came out for February.
03:27 I would suggest that indeed we're out of recession. And if you look at the areas that have done quite well, it's mining and oil.
03:33 Now, the interesting thing, of course, is oil is affected by the oil price, which is affected by international factors.
03:42 You mentioned also in your bulletin that oil prices are going up.
03:45 So I think maybe it's not actually related very much to what's been happening to the domestic economy.
03:52 So I think it's more international factors that have done it. But anything that suggests that perhaps the economy is picking up is bound to be good for shares.
04:00 And I don't know if you heard that headline we were reading earlier about this review of the Bank of England's economic forecasting.
04:08 That's found serious deficiencies. I mean, do you feel sorry for those economists and politicians dependent on what sounds like rather dodgy data?
04:18 Well, no, it depends what you mean by dodgy data. I mean, the truth is that there's been such uncertainty in the world environment and things have been happening that nobody expected, such as the energy crisis.
04:30 And before that, of course, Covid. And what Bernanke, who has done that review, has said very clearly is that the performance of the Bank of England in terms of its forecast is no worse, really, than has been the case in lots of other central banks or even independent forecasters.
04:46 So the real issue is how can you forecast and give some clear indications about the trend in interest rates that matters so much in an environment where these things hit you from the outside?
04:57 And they have been doing so, of course, in a spectacular fashion in the last few years.
05:03 So that's, I think, in a way explains why the Bank of England's forecasts have not been quite right, because the everyone else's have also not been good.
05:13 Vicky, good to see you. Thanks so much for coming on the program again. Vicky Price, the international economist and business consultant.
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