UK GDP Could Support FTSE Rebound

The upcoming UK GDP data for February is anticipated to indicate further economic recovery, which could support the FTSE 100 in building upon recent record highs.

Positive Indications

Monthly UK GDP figures for February published on Friday are projected to align with signs of improvement evident from March PMIs. After experiencing a technical recession in the second half of last year, the UK appears positioned to realise growth in the first quarter of 2024. The forthcoming GDP data are expected to substantiate forecasts of positive expansion.

February's monthly GDP growth is forecast to be flat, following a 0.2% growth in January. This would help lift the 3-month average back to a mild 0.1% from -0.1% prior, as the lacklustre month of November drops out of the calculation. Monthly manufacturing production is also due for release and is anticipated to remain steady. The expected return to GDP increase is despite predictions of a slight widening of the trade deficit, with imports projected to be stronger than exports.​

The Best of the Bunch

Businesses have reported an upturn in UK consumer attitudes, with increased spending and greater optimism in business circles. This has helped the UK see better results than its European counterparts, which are perceived as stagnant. While an overall improvement may benefit UK companies, the benchmark FTSE 100 index has significant exposure to Europe, so gains in the stock market may not be as pronounced.

The UK's benchmark index has been trading just below the previous all-time high of 2023. Although it came close to surpassing this threshold on occasions, it failed to close above it. Recent increases have been supported by a recovery in consumer sectors such as Tesco and Ocado, which are linked to prevailing economic conditions in the UK. However, larger impacts have derived from Shell and BP, which benefited from recent high energy prices, potentially temporarily due to conflicts in the Middle East. Mining sector gains in recent weeks have relied on hopes of strengthened global economic activity, likely immune to forthcoming UK GDP figures. Overall, a more positive outlook for the UK economy would clearly assist the FTSE 100, but broader momentum in worldwide growth may be needed for it to progress beyond 8000 with confidence.​

Footsie Near Double Top

Recent consolidation in Footsie suggests a price increase may occur once the ranging market is resolved. Should the price remain above 7850 and 7750, the likelihood of an upward breakout could rise, though the double top formation at 8050 still poses challenges. Further gains could push the price to around 8100 and 8250, representing rounded levels. Conversely, a break below both regional supports could pave the way for declines to approximately 7600.

Source: SpreadEx/ UK 100

Key takeaways

The upcoming UK GDP figures for February are expected to show growth and support recovery forecasts in the first quarter of 2024. While monthly GDP is forecast to be flat compared to 0.2% in January, this would help push the 3-month average back into positive territory. Better UK economic data and increased consumer spending have recently helped the domestic economy outperform Europe. However, the FTSE 100 may see only muted gains as it has significant European exposure, and its rise likely requires a stronger global growth outlook to push above 8000 for the first time confidently.​