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Economic Review – March 2021

Posted on 13 April, 2021

Bank of England: Outlook ‘unusually uncertain’
The Bank of England (BoE) has expressed growing confidence that a near-term recovery is gathering pace, although policymakers appear split over the country’s longer-term economic prospects. Gross domestic product (GDP) figures released by the Office for National Statistics (ONS) showed the UK economy shrank by 2.9% in January as the third national lockdown kicked in. While this left the economy 9% smaller than before the pandemic hit, this latest contraction was actually weaker than most economists had feared. Survey evidence also suggests that the economy has recently performed more strongly than many had anticipated. Last month’s IHS Markit/CIPS flash composite Purchasing Managers’ Index, for instance, rose to a seven-month high of 56.6 in March, up from 49.6 in February and significantly beating expectations in a Reuters poll of economists…..

Surprise fall in inflation
Lower prices for clothing have triggered an unexpected decline in the UK’s headline rate of inflation, although most economists still expect price pressures to intensify during the coming months. ONS data showed that the Consumer Prices Index (CPI) 12-month rate – which compares prices in the current month with the same period a year earlier – fell to 0.4% in February. This was significantly lower than the previous month’s figure of 0.7% and defied analysts’ expectations of a slight increase in the headline rate…..

Borrowing hits February high
The latest public sector finance statistics show borrowing remains at record levels as the government continues to spend vast sums supporting the economy through the pandemic. Figures released by ONS revealed that UK public sector net borrowing (the gap between the country’s overall income and expenditure) totalled £19.1bn in February. This was £17.6bn more than the comparable month last year and the largest amount borrowed in any February since records began in 1993. Total public sector debt now stands at £2.13trn which equates to 97.5% of the UK’s annual economic output…..

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