With hopes of a record FTSE 100 high dashed until at least Monday, it’s time to wrap up.

Here’s today’s main stories:

Have a lovely weekend; we’ll be back next week. GW

The UK’s blue-chip share index has failed to end the day at a new record closing high.

The FTSE 100 index has closed for the night at 7995 points, up 71 points or 0.9%.

That’s its highest closing high since February 2023, when the index hit its record high of 8,047 points (which we NEARLY hit around lunchtime).

Spirits in the City were lifted by the news that the economy continued to grow in February, with GDP up 0.1%.

This has cemented hopes that the UK will officially exit recession by growing over the first quarter of 2024, with economic institute NIESR today predicting the recession was in the ‘rearview miror’.

Jason Hollands, managing director of online investment platform Bestinvest, says improving optimism about the domestic economy helped lift stocks.

“Today’s confirmation that UK GDP expanded by 0.1% in February, following on from growth of 0.3% in January, will be seen by many as the key reason for the latest market moves as the data signals that the technical recession that the UK entered at the end of last year is almost certainly over.

But other, less cheery, factors are also lifting the FTSE 100, Hollands adds:

Heightened tensions in the Middle East with the risk of a regional war between Iran and Israel breaking out imminently, have propelled both oil and precious metal prices higher. Among the best performers in the FTSE 100 today are mining and energy stocks. As at midday, Fresnillo – the world’s second largest gold miner and largest silver producer – was the best performing FTSE 100 constituent – rising c5%, followed by major copper producer Antofagasta and Anglo American, the world’s largest platinum producer.

Energy is a major sector on the UK market, representing 12.8% of the FTSE 100, and both BP and Shell are on the rise against a backdrop of Brent Crude oil prices exceeding $90 a barrel.

Shares in BP gained 3.6% today, after Reuters reported that Abu Dhabi’s state-owned oil company had considered making a bid.

Housebuilders were also among the top risers, after JP Morgan lifted its rating on several construction firms.

Oil has hit its highest level since last October tonight, amid fears of further Middle East tensions.

Brent crude has hit $92 per barrel for the first time since last October, as Israel braces for the possibility of an attack by Iran,

John Kirby, the White House national security spokesperson, has told reporters that the prospect of an Iranian attack on Israel is “still a viable threat”..

Ben Bernanke’s report into the Bank of England’s forecasting is measured but still quietly devastating, our economics editor Larry Elliott writes:

The Bank of England has got markedly worse at forecasting the economy in recent years. Its economic model is faulty. Its systems are out of date. It has been reluctant to admit past mistakes. Communication with the public could be better.

If Threadneedle Street thought it was going to get an easy ride when it called in the former head of the US central bank, Ben Bernanke, to conduct a review of how decisions on interest rates have been made in recent years, it was mistaken.

More here:

Ben Bernanke’s review makes 12 recommendations to improve the Bank of England’s forecasting and related processes.

Some of them focus on software, including either improving or replacing the BoE’s baseline economic model, known as COMPASS.

Others look at ways to improving the bank’s forecasts, and the way they are presented in the monetary policy report (MPR).

Here’s the list:

1. The ongoing updating and modernisation of software to manage and manipulate data should be continued with high priority and as rapidly as feasible.
   

2. Model maintenance and development should be an ongoing priority, supported by a significant increase in dedicated staff time and adequate resources, including specialised software as needed.
   

3. Over the longer term, the Bank should undertake a thorough review and updating of its forecasting framework, including replacing or, at a minimum, thoroughly revamping COMPASS.
   

4. Revamp the Bank’s forecasting framework, including a rich representation of the monetary transmission mechanism, empirically based modelling of inflation expectations, models of wage-price determination that allow gradual adjustment and causation from prices to wages as well as from wages to prices, detailed models of key components of the UK economy, and a greater focus on the supply side of the economy.
   

5. Encourage Bank staff to highlight significant forecast errors and their sources
   

6. The Bank should review its personnel policies to determine if existing staff could be deployed in ways that improve the forecasting infrastructure and forecast quality.
   

7. The monetary policy committee’s central forecast should be regularly augmented by alternative scenarios, with the specific scenarios ideally decided upon at an early stage of each forecast round by the MPC and staff.
   

8. Publish selected alternative scenarios in the MPR, along with the central forecast, to help the public better understand the reasons for the policy choice, including risk management considerations.
   

9. The MPC should de-emphasise the central forecast based on the market rate path in its communications and be exceptionally clear in warning about situations in which it judges the standard conditioning assumptions to be inconsistent with its view of the outlook.
   

10. The MPC should also replace or cut back the detailed quantitative discussion of economic conditions in the Monetary Policy Summary in favour of a shorter and more qualitative description, following the practice of most peer central banks.
    

11. The fan charts published in the MPR should be eliminated
    

12. Extra resources should be dedicated to implement the changes being recommended

Newsflash: An eagerly awaited review of the Bank of England’s forecasting methods, conducted by former top US central banker Ben Bernanke, is out… and it urges the UK central bank to fix its forecasts and technology.

The Bernanke review has been billed as an opportunity for a ‘once in a generation’ overhaul of the BoE’s forecasting.

And it has found that the Bank has used out-of-date methods and failed to communicate clearly with the public.

This undermined the BoE’s record of forecasting inflation and the path of interest rates, according to the review.

My colleague Phillip Inman reports:

In a bruising assessment, the former US Federal Reserve boss Ben Bernanke said the Bank spent much of its time attempting to justify its poor judgment rather than admit its failures and change course.

Accusing the Bank of appearing to “at times suffer from excessive incrementalism”, he said policymakers had raised rates too slowly over the past two years when it was clear inflation was already rising beyond normal levels.

After an eight-month review, Bernanke says rather damningly that “the accuracy of the BoE’s forecasts has deteriorated significantly in the past few years”. But he also points out that other central banks have had similar problems.

He also advises the BoE should scrap its fan charts, which it uses to show the likelyhood of a range of outcomes, in favour of a more qualitative assessment of risks – using alternative scenarios to show how the bank might act if economic conditions play out unexpectedly.

Bernanke’s review also found that “the most serious problems” were the deficiencies of the Bank’s forecasting infrastructure.

These are the tools the staff uses to produce the quarterly forecast and supporting analyses.

“Some key software is out of date and lacks important functionality,” the review says.

The UK recession is now in the “rearview mirror”, says forecasters at the National Institute of Economic and Social Research, who predict GDP will grow by 0.4% in the first quarter of this year.

This return to growth would mean that the recession, which began in the second half of last year, would be over.

Following this morning’s news that the economy grew by 0.1% in February, and by 0.3% in January, NEISR sees growth continuing.

It says:

We forecast GDP to grow by 0.4 per cent in the first quarter of 2024. Our early forecast for the second quarter of this year sees GDP growing by 0.3 per cent.

While exiting from the shallow recession in the second half of 2023 is welcoming, these forecasts remain broadly consistent with the longer-term trend of low, but stable economic growth in the United Kingdom.

The pound has weakened to its lowest level against the US dollar so far this year.

Sterling has lost over half a cent this morning, sending it down to $1.249 against the dollar this morning. That’s the lowest since late November last year.

It appears to be mainly due to dollar strength, with the US currency benefitting from forecasts that the Federal Reserve will cut interest rates more slowly than expected.

The euro is also down against the dollar, after the European Central Bank signalled yesterday it could start cutting interest rates in June.

Neil Wilson, chief market analyst at Markets.com, says:

The UK economy grew tepidly in February, with GDP expanding by 0.1%. Sterling remains under the cosh.

The euro sank to its weakest since mid-November on anticipation of policy divergence.

Share prices in London are rallying (see previous post) on relief that the UK economy continued to grow in February, reports Russ Mould, investment director at AJ Bell.

With the FTSE 100 index rising through the 8,000 point mark this morning, he says:

“The second monthly GDP increase in a row for the UK has triggered a ticker tape parade from investors as they become more hopeful the country will come out of recession.

“Both the FTSE 100 and the more domestic-focused FTSE 250 index jumped 0.8% at the market open, indicating investors are happy that the economy is moving forward, albeit at a snail’s pace. Some growth is better than no growth at all.

“Housebuilders and supermarkets were in demand as investors took the view that a stronger economy will give a boost to consumer confidence and provide a better backdrop for spending.

“Miners also helped to give the FTSE 100 a lift as copper prices continued to climb thanks to the twin engines of supply fears and brighter demand prospects.

Britain’s FTSE 100 share index has climbed back to 8,000 points, less than 50 points from its alltime high.

The blue-chip index has now gained 78 points, or almost 1%, today, to trade at 8,004 points. That puts it nearer its alltime peack of 8,047 points.

Markets are recovering after a choppy week, as investors weigh up Wednesday’s high-than-expected US inflation reading which has undermined hopes of early interest rate cuts in America.

Precious metals producer Fresnillo is the top riser, up 5%, after the gold price hit a new record high today.

UK housbuilders Taylor Wimpey (+4.4%) and Persimmon (+3.5%) are close behind.

And BP is still in the top risers (+2.5%), following last night’s reports that the UAE’s state oil company has explored a multibillion pound takeover.

Shares have opened higher in London, as City traders digest the news that Britain is escaping recession.

The FTSE 100 index of blue-chip shares has gained almost 0.9% or 68 points, to trade at 7992 points.

Nearly every share on the Footsie is up, helping to move it closer to its alltime high of 8,047 points, hit in February 2023.

BP is among the top risers, up 2.6%, after Reuters reported last night that the United Arab Emirates’ state-owned oil company had considered launching a takeover bid for the UK oil giant!

Those deliberations “did not progress beyond preliminary discussions”, though.

The Institute of Directors don’t share Jeremy Hunt’s cheery take on today’s GDP report.

Dr. Roger Barker, Director of Policy at the Institute of Directors, points out that the economy barely grew in February, by expanding just 0.1%.

This suggests that the economy is still in a fragile state, Barker warns, adding:

After a strong start to the year, the consumer-facing parts of the economy – particularly accommodation and food services – took a backward step. Construction was also surprisingly weak, although there were encouraging signs of revival in production and manufacturing output.

“It appears that the UK’s ascent out of the mild technical recession of last year is a relatively shallow one. Although the latest figures suggest that the UK is likely to generate positive economic growth in the first quarter, there are few signs of a strong economic rebound.

The assertion that the UK economy has decisively turned the corner, as recently asserted by the Prime Minister, is still yet to find confirmation in the data.

City experts sound confident that the UK economy will pull itself out of recession.

Today’s news that the economy grew by 0.1% in February and 0.3% in January bolsters hopes that GDP did not shrink in the January-March quarter.

If that happens, it would end the techncial recession that gripped the country in the second half of 2023, when GDP shrank in Q3 and Q4 2023.

Having said that, though, growth 0f 0.1% in February isn’t exactly rollicking.

Richard Carter, head of fixed interest research at Quilter Cheviot, says:

“The UK has continued its positive start to the year as GDP grew again in February, albeit only marginally, and looks on course to be pulled out of the short and shallow recession it entered at the end of last year.

“UK GDP is estimated to have risen 0.1% in February, a slight dip compared to January’s 0.3% growth which was revised up from 0.2%, but still positive nonetheless. This uptick was driven primarily by improvements in the UK’s services and production sectors.

Neil Birrell, chief investment officer at Premier Miton Investors, says:

“The UK economy grew, albeit very modestly, in February, suggesting that any sort of meaningful recession will be avoided.

With inflation tracking back, the Bank of England might be persuaded to start cutting rates sooner rather than later and after the CPI data out of the US and the ECB meeting over the last week, we could well see the Fed being the last of the three to take any action on rates. That would quite a shift over a period of a few months.”

“The sun is finally out but the UK economy outlook remains foggy” says Yael Selfin, chief economist at KPMG UK.

“Despite weaker momentum in February, the economy’s ongoing recovery is the latest piece of evidence that the shallow technical recession is already behind us. Growth was helped by the January cut in National Insurance, a further boost to purchasing power from falling inflation, and an easing in cost pressures for businesses. Combined with more timely survey data, we expect GDP to grow at around 0.3% over Q1.

“Nonetheless, there are limits to the UK’s growth potential this year. Consumer spending remains fragile. Business investment could be dented by uncertainty related to the general election and growing speculation around a second fiscal event in the Autumn, while weakness in the housing market could further drag on construction by lowering the return on new housebuilding.

Chancellor of the Exchequer Jeremy Hunt has welcomed the news that the UK economy grew by 0.1% in February, saying:

“These figures are a welcome sign that the economy is turning a corner, and we can build on this progress if we stick to our plan.

“Last week our cuts to National Insurance for 29 million working people came into effect across Britain, as part of our plan to reward work and grow the economy.”

Britain’s economy has taken a step closer to exiting recession after official figures showed growth continued in February despite a washout month for retailers after one of the wettest starts to a year on record.

Here’s the full story:

Britain’s industrial sector was the largest contributor to growth in February.

Today’s GDP report shows that production output grew by 1.1% in February, more than reversing a 0.3% drop in January.

Manufacturing output rose by 1.2%, driven by a surge in manufacturing of transport equipment such as cars.

The services sector had a calmer month – it grew by 0.1% in February, slower than the 0.3% growth in January.

And it was a month to forget for builders, with construction output falling by 1.9% in February.

The ONS cites “anecdotal evidence” that heavy rainfall delayed planned work and decreasing output in February.

Here’s ONS director of economic statistics Liz McKeown on the news that the UK economy grew by 0.1% in February:

“The economy grew slightly in February with widespread growth across manufacturing, particularly in the car sector. Services also grew a little with public transport and haulage, and telecommunications having strong months.

“Partially offsetting this there were notable falls across construction as the wet weather hampered many building projects.

“Looking across the last three months as a whole, the economy grew for the first time since last summer.”

Newsflash: the UK continued to grow in February, boosting hopes that the economy is escaping recession.

GDP expanded by 0.1% in February, new data from the Office for National Statistics shows, lifted by growth in the production and services sectors.

And the ONS has lifted its forecast for January, to show 0.3% growth, up from 0.2% previously estimated.

This suggests the economy may manage to grow in the first quarter of 2024. And that would mean the short, shallow recession that began at the end of 2023 will officially end.

Even if the economy is growing again, households are still struggling.

Half of consumers have cut back on their non-essential spending so far this year, with eating out the most likely thing to be cut from budgets, a survey this morning shows.

Just 3% of consumers say that they have been able to spend more on non-essentials in the first quarter, with 52% cutting back, according to the KPMG Consumer Pulse survey.

Eating out was the most common discretionary spending cut, listed by 72% of those who are scaling back, followed by clothing purchases (62%) and takeaways (58%).

Good morning.

We’re about to learn whether the UK is climbing out of the recession into which it slipped at the end of last year.

At 7am, the Office for National Statistics will release its first estimate for UK GDP in February, and the City are hoping to see signs of growth.

Economists predict that GDP rose by 0.1% in February; a weak expansion, following 0.2% growth in January. That would raise the chances that the economy grew in the first quarter of 2024 – which would end the recession.

Reminder: The UK ended 2023 in a technical recession, after shrinking slightly in both the third and fourth quarters of last year.

To escape recession, it needs to not shrink in January-March (and that data is due in a month’s time).

Bad weather may have weighed on UK growth this year, though. We already know that retail sales growth slowed during a wet February, when storms kept people at home.

Any signs that the downturn is over would be welcomed by the government, with a general election close.

But the financial markets are not being very kind to Rishi Sunak this week. The PM’s hopes that the public might see lower taxes and cheaper mortgages soon have weakened, as traders scaled back expectations of interest rate cuts in 2024 yesterday.

The City now expects just two quarter-point cuts to UK interest rates in 2024, which would lower rates by half a percentage point to 4.75% by December.

Today’s GDP report may not change the outlook for rate cuts, explains Danni Hewson, head of financial analysis at AJ Bell:

UK GDP figures are expected to be tepid, not too hot or too cold, and unlikely to do much to change thinking at the Bank of England.

“Where just a few months ago markets were betting rates here in the UK could fall below 4% by Christmas now only two cuts are being priced in. The sands are shifting and investors are having to be fleet of foot.”

The agenda

• 7am BST: UK GDP report for February

• Noon BST: Bank of England to publish review of its forecasting models

• 1pm BST: India’s inflation rate for March

• 3pm BST: University of Michigan’s index of US consumer confidence