A spate of economic data has indicated promising signs the economy will grow, but experts worry this could be bad news for markets as rates will be forced to rise even higher.

The reasons for a possible economic downturn varied across the globe. In the US and UK, banks had openly acknowledged that a recession was necessary to combat inflation. In Europe, the concern was more focused on shortages of gas and energy.

However, the situation in Europe has significantly changed in recent weeks. As winter approached, gas storage tanks were almost full, and Russian gas was replaced with American liquefied natural gas. Consequently, usage during the peak winter months was limited, thanks to consumers and businesses being more cautious with their energy consumption and the mild winter weather.

According to the Financial Times, the storage tanks are still 63% full, compared to 30% last year. This strong position ensures that even the next winter is becoming increasingly secure. The wholesale gas price has decreased, resulting in a more positive outlook for businesses and consumers. In February, consumer confidence rose to -19, the highest level in a year.

In the UK, there is less convincing evidence that inflationary pressures have peaked. Wage growth is still on the rise, and while business confidence has been boosted by the fall in gas prices, policymakers still have work to do. The Bank of England may need to increase interest rates further to keep activity low until inflation decreases.

Overall, the likelihood of a severe global recession has decreased. There is no doubt Europe’s economy has been through a lot in the past few years, with the COVID-19 pandemic posing significant challenges for both individuals and businesses. However, the continent is now showing some signs of recovery, with the economic outlook improving.

All in all, it is a very confusing picture as we head further into 2023. The ERA team can’t influence the international wholesale price, nor the tax policies of governments, but our expertise helps clients ensure that they are obtaining the very best value for money in all sectors.