UK GDP growth projections of 1,1% in 2024, retail prices deflation since August.

In its revised outlook, the OECD projects UK GDP to rise by 1.1% this year, surpassing the collective growth of the euro area. This marks a significant improvement from the 0.4% growth forecast made in May for 2024. The UK’s economic prospects have received one of the largest upgrades among the OECD's 38 member nations. However, the OECD cautioned that these predictions are contingent on global events, referencing a series of disruptions over recent years, including the COVID-19 pandemic, Russia's invasion of Ukraine, and the ongoing conflict in the Middle East.

Interest rates still too high

The UK's improved forecast is largely attributed to better-than-expected economic performance during the first half of 2024, when the country emerged from a mild recession that had gripped the second half of the previous year. Economists widely blamed the downturn on the Bank of England's aggressive interest rate hikes, aimed at tackling inflation. Despite this, the OECD warned that inflation remains a persistent risk for the UK, driven by a high pace of wage growth and continued pressure from services price inflation. The Bank of England has echoed these concerns, signalling a cautious approach to future interest rate cuts following a modest reduction from 5.25% to 5% in August.

Retail prices deflation by 0,2% in August, still 1% inflation for fresh food

hop Price deflation was at 0.3% in August, down from inflation of 0.2% in the previous month, according to the British Retail consortium (BRC). This is below the 3-month average rate of 0.0%. Shop price annual growth remained at its lowest rate since October 2021. Non-Food remained in deflation at -1.5% in August, further down from -0.9% in the preceding month. This is below the 3-month average rate of -1.1%. Inflation is at its lowest rate since July 2021. Food inflation slowed to 2.0% in August, down from 2.3% in July. This is below the 3-month average rate of 2.%. The annual rate continues to ease in this category and inflation is at its lowest rate since November 2021. Fresh Food inflation slowed further in August, to 1.0%, down from 1.4% in July. This is below the 3-month average rate of 1.3%. Inflation is its lowest rate since October 2021. Ambient Food inflation decelerated to 3.4% in August, down from 3.6% in July. This is below the 3-month average rate of 3.7% and is the lowest rate since March 2022.