Morning Update

Data from the ONS indicated that the UK’s household savings ratio grew 10bps over the final quarter of last year, rising to 10.2%. This represents the highest level since Q1 2021, when many households amassed savings during the course of the pandemic and various lockdowns.

This comes against an average of around 8.5% percent from 1955 until 2023.

According to the report, this growth came though “a rise in net social benefits other than social transfers in kind of £3.9 billion together with increased employers’ social contributions of £2.0 billion and wages and salaries of £1.4 billion”.

With the household savings ratio rising, real disposable income was estimated to have grown 0.7% over Q4 2023, up from more or less stagnant growth during Q3. In fact, the latest data downwardly revised disposable income levels over Q3 citing an upward revision in taxes on income and a downward revision regarding net social benefits.

According to the Organisation for Economic Co-operation and Development, Switzerland recorded the highest level of household savings at 19.3%, followed by Sweden and the Netherlands at 13.3% and 12.3% respectively.

The latest growth data out from the ONS reconfirmed that the UK went into a technical recession at the end of last year. The print this morning came in line with expectations and the previous figure which showed the UK economy contracted 0.3% over the final quarter of 2023 on a quarter-on-quarter basis. This followed GDP falling 0.1% over Q3.

The latest estimate indicates that the UK economy grew just 0.1% over the course of 2023, falling well below the growth rate of other economies including the US which grew 2.5%, and the Eurozone area which grew.

The latest data also suggests that the size of the UK economy is marginally smaller than at the start of 2021.

Cocoa futures have continued to rally this week as they trade at all time highs having risen close to 55% on the month and 240% on the year. This comes against a multitude of supply and demand side factors which we explore in this moth’s issue of WTFX, so be sure to keep an eye out for this.

Following the release of UK GDP figures, this morning’s attention will shift to the release of German unemployment at 0845. Here, the general market consensus is pointing to a print of 5.9%. At 12:30, we will see the release of the latest Canadian GDP figures for January, where forecasters are predicting month-on-month growth to tick up from the 0% figure recorded in December to 0.4%.

12:30 will also see the release of US GDP figures along with initial jobless claims and PCE figures as markets consider how the latest figures could influence monetary policy decisions moving forward.