The UK economy has entered the second quarter of 2023 — and the new financial year — in far better shape than might have seemed possible six months ago in the turbulent aftermath of Kwasi Kwarteng’s mini-Budget.
Recession has thankfully been avoided, unemployment has remained at close to record lows, consumer spending has proved resilient, the pound is one of the year’s strongest performing major currencies, and the stock market has recovered from its Silicon Valley Bank-induced fit of the vapours. It could all be a lot worse.
But there are reasons to suspect that while the first quarter proved more benign than expected, the second quarter could spring some nasty surprises.
We are about to enter “peak remortgage” when hundreds of thousands of borrowers will learn just how much more they will have to pay to keep the roof over their heads.
There are also some early signs that consumer spending is finally starting to fall back to earth having defied gravity during a post-pandemic relief splurge over the winter.
Latest figures from analyst Springboard show retail footfall fell 2.8% in March after surging by 9.4% in February.
My hunch is that we will start to see more references to softer consumer confidence in the company results and trading updates published after Easter.
The great unknowns remain inflation and the direction of interest rates, but the signs are not good. As with Queen Elizabeth II’s Jubilee and funeral last year the economic waters will be muddied by a major royal event — this time the Coronation.
But once all the bunting has been packed away we could be in for a chilly summer
