7 reasons to be cheerful about the economy in 2023

The past 12 months have certainly been a turbulent time for the economy and maybe for your own personal finances too. With soaring inflation and the cost of living crisis in the news on an almost daily basis, you might be feeling a little bit wary about what 2023 could have in store.

Luckily, there are some good news stories that could help you to feel a little bit more optimistic about the year ahead. Read on to discover seven reasons to be cheerful about the economy in 2023.

1. The economy has avoided a recession so far

Recent figures from the Office for National Statistics show that there was no economic growth in Q4 of 2022. Even though a contraction of 0.5% was recorded for December, the economy grew by 0.1% in November and 0.5% in October, exceeding economists’ expectations.

So, while recession is predicted in the coming year, so far this has been avoided.

2. The World Cup in November encouraged more spending

Watching football matches in your favourite pub and celebrating (or commiserating) meant that more people were spending their money on the high street. Spending is great for the economy, so this was an unexpected but welcome development.

3.  Wholesale energy prices are falling

Recent data suggests that the price of energy is starting to fall, which in turn could help to lower inflation and ease the cost of living crisis for households across the country.

According to a report by the Guardian, these price savings could begin to show up in household bills from July. Even though bills will likely still be higher than the energy price cap from before prices began to rise in late 2021, things certainly seem to be moving in the right direction.

The drop in price is due to the plentiful gas reserves that are being stored in Europe. Thanks to a mild winter, demand for gas has been lower than predicted. If reserves remain at a high level then wholesale gas prices could drop further over the coming months. 

4. Inflation appears to have peaked

Even though inflation remains high at 10.1%, the Bank of England (BoE) expects this to fall quickly throughout 2023. This is due to various reasons, all of which are expected to contribute to a reduction in inflation:

• The price of wholesale energy has fallen significantly, and is expected to reduce household bills later this year.

• Many of the increased production costs that businesses have faced in recent months have begun to fall too, so it’s now much more affordable to import goods. This means the price of these goods will fall in response.

• Since many people are cutting down on their spending, there will be less demand for goods and services. This usually means that prices for goods and services fall.  

5.  Interest rate rises are slowing down

As a result of inflation starting to come back under control, the BoE has already begun to relax the policy of interest rate rises. The two most recent increases to the base rate were smaller than those implemented in 2022 (0.5% rather than 0.75%).

With interest rate rises cooling, the cost of borrowing could fall back to a more manageable level meaning that mortgage rates, for example, could reduce throughout 2023. The graph below shows how the rates have already begun to fall since the peak in October 2022.

Source: BBC

6. The UK stock market is rallying

In 2022, the FTSE 100 outperformed most other stock indices in the world, and it continues to rally. The Guardian has reported that it hit an all-time high on 3 February, followed by another on 8 February. The exceptional performance is thought to be due to the fact that central banks, including the BoE and Federal Reserve, have slowed their interest rate rises.

Additionally, the FTSE All-Share Index has risen by more than 250 points since the start of 2023. As of 16 February 2023, it’s at its highest level in over a year, as demonstrated by the graph below.

Even though the stock market isn’t the same thing as the economy, when markets go up, it suggests that investors are feeling optimistic about the future. So, a rallying stock market could mean that similarly good news might follow in the economy too.

Source: London Stock Exchange

7.  Remember that headlines tend to focus on the negatives

One final thing to keep in mind is that good news rarely makes the front page. That’s why headlines that you see on a daily basis will focus on the bad or frightening news in order to catch your attention. 

This is great for the companies who want to sell lots of newspapers or get lots of clicks on their articles, but it’s not so great if you want to take a more balanced view of what’s really going on.

So, if you find yourself feeling as though all hope is lost, take a moment to search for the good news stories. It’s rare that there is no good news to be had, but you do sometimes need to search a little harder to find it.

Get in touch

If you’d like to make sure 2023 is a positive year for your financial wellbeing, we’re here to help you make a plan and implement the steps to grow your wealth and achieve your goals. Email theteam@fortitudefp.co.uk or call us on 01327 354321.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.