GDP (Gross Domestic Product) is the total value of all goods and services produced in a country. When it falls for two consecutive quarters, that's a recession. Here's why this matters personally.
GDP and Jobs
Growing GDP typically means businesses expand and hire. Shrinking GDP means cost cuts — and often jobs. The labour market data closely follows GDP direction over time.
GDP and Interest Rates
The BOE watches GDP closely. Strong growth gives room to raise rates to prevent overheating. Weak growth creates room to cut to stimulate the economy. This is why GDP releases often cause mortgage rates to shift immediately — if GDP comes in weaker than expected, markets price in rate cuts, and fixed mortgage rates start falling.
GDP and the Pound
Strong UK GDP strengthens sterling, making imports cheaper and reducing inflation. Weak GDP often weakens sterling — inflationary.
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