The latest update from HSBC Lead Economist Mark Berrisford Smith looks promising, but ,”the process of getting back to normal will be slow going.”
After nearly a year spent grappling with the shockwaves from the Ukraine war, the global economy looks to have turned a corner, with recent data coming in better than expected and with business surveys in January showing a clear improvement. Especially noteworthy was the resurgence of activity and sentiment reported by service sector businesses in the USA and in China.
But the process of getting back to ‘normal’ will be slow going. The aggressive tightening of monetary policy by central banks during 2022 will take some time to feed through to households and businesses. And commodity prices are unlikely to fall much further, if at all, as China’s re-opening boosts demand.
The UK avoided a ‘technical recession’ in the second half of last year, albeit only by the narrowest of margins. But its economic performance looks distinctly underwhelming compared with its peers: GDP in the final quarter of 2022 was still nearly 1% lower than at the end of 2019; and, among the G7 economies, only Italy now has a higher inflation rate.
HSBC has made a slight upward revision to its UK growth forecast for 2023, but still expects full-year GDP to be 0.4% smaller than in 2022. Meanwhile, the Bank of England is expected to hike interest rates one last time in March, taking UK Bank Rate to 4.25%.
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