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UK in Recession after Economic Data Comes in

Rate cuts have started with the Bank of Israel delivering a 25 bps cut

Recession has hit the UK and other major economies after two quarters of economic decline.

The definition of an economic recession is two consecutive financial quarters where growth fell, which is exactly what has happened in the UK, Japan, New Zealand, and several European Union (EU) economies. Some of that is surprising, especially for Japan, which is now below the United States on world economic rankings.

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The 4th quarter report for Japan for 2023 shows that the economy shrank as capital spending declined and tourism was not able to make up for the shortfall as expected. Private consumption is down as well, indicating that Japanese citizens are being careful with their spending, hoarding yen in fear of worsening economic conditions. In a thriving economy, the cash flows freely because people expect more to come in regularly, but that is not the case right now for Japan, and fear could cause further economic shrinkage in the current quarter.

Why Is the UK in Recession?

The statistic’s agency for the UK said in a report issued on Thursday that the country’s gross domestic product (GDP) had fallen 1.4% in 2023’s last three months. In comparison, the US GDP actually grew 3.3% in that time. The US has now pulled ahead of the UK, Japan, and every other country to become the world’s leading economy.

The UK is suffering a recession primarily because the cost of living is so high. This has created a housing crisis and tanked consumer spending and productivity rates. With the country producing less and selling less, it simply cannot keep pace with previous years. The country also has a growing elderly population that requires greater resources to sustain it, placing more pressure on the younger working class.

Borrowing costs are also rising quicker than expected, which is being offset by the bank of England’s decision to wait on interest rate cuts. This attempt at improving inflation rates is having a small impact on the value of the euro and the pound, but rate cuts could be coming later on in the year.

The UK’s economic output dropped 0.1% in the final quarter of 2023, and if this continues into the first quarter of 2024, the country will still be in recession following the next economic report. The government has to look for ways to boost the economy, stimulate growth, and improve production.



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Timothy St. John
Timothy St. John
Financial Writer - European & US Desks
Timothy St John is a seasoned financial analyst and writer, catering to the dynamic landscapes of the US and European markets. Boasting over a decade of extensive freelance writing experience, he has made significant contributions to reputable platforms such as Yahoo!Finance, business.com: Expert Business Advice, Tips, and Resources - Business.com, and numerous others. Timothy's expertise lies in in-depth research and comprehensive coverage of stock and cryptocurrency movements, coupled with a keen understanding of the economic factors influencing currency dynamics. Timothy majored in English at East Tennessee State University, and you can find him on LinkedIn.
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