UK GDP report to show if economy returned to growth in January – business live

Alvin Tan of RBC Capital Markets predicts the UK grew by 0.1% in January – but that might not stop the economy shrinking during the current quarter….

January’s UK dataflow has been somewhat mixed, but the details of the January PMIs, the services PMI in particular, painted a more positive picture than the headline readings suggested in our view. We look for January GDP (Friday) to grow at 0.1% m/m.

Although such an outcome would still mean it is possible for Q1 GDP as a whole to fall, it equally means that any contraction will be small and likely temporary.

Good morning

We’re about to discover if the UK economy has returned to growth after struggling at the end of last year.

January’s GDP report, due at 7am, will show if the economy expanded or not in the first month of 2023. It’s the final healthcheck on the economy before next Wednesday’s budget.

Economists predict UK GDP may have crept up by 0.1% in January, after the economy stagnated in the final quarter of 2022.

A month ago, we learned that in December alone, the economy shrank by 0.5% as strikes in the public sector, rail and postal services.

Related: UK narrowly avoids recession after figures show growth flatlining

There have been signs that the economy might be a little stronger than feared.

The British Chambers of Commerce (BCC) forecast on Wednesday that the UK economy is on track to shrink less than expected this year and avoid the two quarters of negative growth which mark a technical recession.

And last week, the Bank of England’s chief economist said Britain’s economy is showing slightly more momentum than expected.

As Huw Pill put it:

“Survey indicators that have become available since the publication of the forecast have surprised to the upside, suggesting that the current momentum in economic activity may be slightly stronger than anticipated.”

Also coming up today

A heavy selloff in US bank shares last night has sent jitters through the financial markets today.

European stocks are expected to fall over 1% when trading begins:

Last night’s sell-off in JPMorgan Chase (-5.4%), Bank of America (-6.2%), Citigroup (-4%) and Wells Fargo (-6.2%) came after a small technology-focused lender called Silicon Valley Bank announcd a capital raise, which sent its stock collapsing by 60%.

Reuters explains:

SVB, which does business as Silicon Valley Bank, launched a $1.75 billion share sale on Wednesday to shore up its balance sheet. It said in an investor prospectus it needed the proceeds to plug a $1.8 billion hole caused by the sale of a $21 billion loss-making bond portfolio consisting mostly of U.S. Treasuries. The portfolio was yielding it an average 1.79% return, far below the current 10-year Treasury yield of around 3.9%.

Investors in SVB’s stock fretted over whether the capital raise would be sufficient given the deteriorating fortunes of many technology startups that the bank serves. The company’s stock collapsed to its lowest level since 2016, and after the market closed shares slid another 26% in extended trade.

Another California bank, Silvergate Capital Corp, had announced a voluntary liquidation this week, after mass withdrawal of deposits after collapse of FTX exchange.

Related: Crypto bank Silvergate announces liquidation amid sector turmoil

The latest US Non-Farm Payroll is expected to show that around 205,000 new jobs were created in America last month, down from the unexpectedly strong 517,000 in January.

The agenda

• 7am GMT: UK GDP report for January

• 1.30pm GMT: US Non-Farm Payroll report

• 3pm GMT: European Central Bank president Christine Lagarde visits German Federal Chancellor Olaf Scholz