Experts say the sharp drop in energy prices and a projected decline in inflation mean the UK economy could perform better than feared.
Millions of people are struggling with the most difficult economic situation in recent memory, with bills soaring and slow growth amid forecasts of a protracted recession.
But there may be good news on the horizon as we begin to see some green sprouts of a recovery that could provide much-needed respite from household budget cuts.
Energy prices, while still high, are down 80% from their peak in August last year, with gas prices forecast to fall further throughout the year.
The lack of growth in home foreclosures and a strong job market are also cause for optimism, Principality Building Society CEO Julie-Ann Haynes told BBC Radio 4 on Sunday.
She said: “We have not seen any increase in property seizures in my own business or in other companies in the sector. We’re getting more calls from concerned customers, and that’s understandable given some of the very difficult increases we’ve seen for gas, energy, gasoline and food that you’ve just been talking about.
“But certainly encouraging, we have a very strong job market, so in the past whenever there’s been a recession, we’ve typically seen a significant increase in unemployment and we don’t expect that, so that makes some sense. for optimism.
And Chris Giles, economics editor at the Financial Times, told the same program that the glass is “half full, not half empty” because economic forecasts “do not look as scary” as they did in November.
Regarding inflation, which is just above 10%, he said: “We expect the figure to be slightly below 6%. [per cent] by the end of the year we had a lot of big price increases; in gas prices, in food prices, they have already happened. So the situation should not get much worse, and therefore by the end of the year we may well feel better.”
Here we look at early signs that the country’s finances may be taking the first steps towards recovery, and where problems still remain.
Energy prices are expected to fall in July, pushing energy prices below the £2,500 price ceiling as wholesale gas prices are expected to fall this summer.
Milder weather and higher levels of gas inventories are believed to be behind the drop, calming fears of a possible shortage of Russian gas as the war in Ukraine continues.
HSBC announced a reduction in its previous forecasts of future wholesale gas prices by about 30%, the forecast for 2024 is 20%.
The bank noted that wholesale gas prices had halved since mid-December to levels not seen before the invasion of Ukraine.
Electricity bills are forecast to drop by just over 6% from a previous estimate of £2,640 earlier this month. According to analysis by Investec, the average account will rise to £2,478 this summer.
Prices are then expected to reach an average of £2,500 per annum in the second half of 2023.
The Government Energy Price Guarantee (EPG) limits typical household energy prices to below this amount for the average household.
However, there is no cap on how much a household can charge and electricity bills will still be based on usage, with the cap rising to £3,000 in April for the next 12 months.
Bills are still at a record high since the 2021 energy crisis, when households paid an average of £1,200.
A sharp drop in home prices looks unlikely despite earlier predictions by lenders, real estate firms and real estate platforms that average home prices could fall by 10% in 2023.
The National Property Buyers Association (NAPB) said a projected collapse in UK house prices “looks increasingly unlikely” but prices are expected to continue to fall over the next six months.
Jonathan Roland, NAPB spokesman, said: “While the outlook for 2023 in terms of home prices is far from rosy, the collapse in prices that many fear and few desire seems increasingly unlikely.”
Mr. Roland said he believes the market can bounce back despite rising interest rates, the cost-of-living crisis, the pandemic and the withdrawal of mortgage products.
“The list goes on and so far we have not seen a free fall in prices,” he said.
That’s because the number of new buyers hit the second-highest in 14 years last year, with 370,000 people taking their first step up the real estate ladder, according to Zoopla, which attributes the rise to high employment and low employment. borrowing costs.
Rishi Sunak made his ambitious promise to halve inflation in his Five Promises speech earlier this month.
The prime minister appears to be on track to deliver on that promise as John Allan, chairman of Tesco, said he believes inflation will come down by the summer.
However, the supermarket boss tempered his optimism by warning that those on lower wages are likely to continue to struggle.
Mr. Allan said on Sky Sophy Ridge On Sunday: “We are hoping that food inflation will probably peak around the middle of this year, but to be honest, this is more of an aspiration than a forecast and does not mean prices will will start to fall. this means they will stop growing so fast.
“I think inflation will come down, but remember that halving inflation will still mean a 5 or 6 percent increase in prices, which will look fantastic compared to today, but prices will still go up.”
Inflation surged last year to a 41-year high at the start of last year and is currently at 10.7% with a target of 2%.
Credit: www.independent.co.uk /