VICTORIA SCHOLAR

Head of Investment Interactive Investor

GROWTH in the final quarter of 2022 defied the doomsayers.

October’s gross domestic product enjoyed a lift from the pick-up in working days after September’s additional bank holiday for the Queen’s funeral.

But the quarterly performance was offset by weakness in December, due to industrial action. The Premier League’s match pause for the World Cup also harmed economic activity.

After an extremely challenging 2022 economically – with the war, post-pandemic supply chain problems, sky-high inflation and sluggish growth – green shoots of optimism are now growing.

UK inflation is likely to have peaked, so there is potential for living costs to fall this year.

Optimism

After an aggressive period of rising rates, with 10 consecutive hikes from the Bank of England, we are likely nearing the peak for interest rates. The Bank may cut rates by the end of the year to stimulate economic growth.

In May, the King’s Coronation is likely to provide a tailwind for tourism and consumer spending.

Plus, the FTSE 100 has hit record highs over the last week as investors pile back into stock markets, amid a revival in investor optimism.

Last year’s political turmoil around the disastrous miniBudget is fading into the rear view mirror. Sterling has appreciated by over 10 per cent against the dollar since then.

Inflation rates in Europe and the US have recently eased as well, relieving pressure on businesses and consumers.

China has started to dismantle its zero-tolerance approach to Covid, unleashing a wave of demand for goods and services.