The UK’s economy is improving, but people don’t notice

The latest UK growth figures are important not because they show a boom, no.

If sustained, they show that an economy is returning to its normal growth rate. The UK is now the joint fastest growing in the G7, equaling Canada and surpassing France, Germany, Italy, Japan and the US.

But growth has been so sluggish for years that the normal growth before the financial crisis of the late 2000s has been very robust by recent standards.

The economy has proven remarkably resilient to all shocks thrown at it. Interest rates have been near zero for 15 years, with sharp rises in the past year and their highest level in 16 years.

This opening for 2024 will provide impetus to the economy throughout the year, building business and consumer confidence.

An immediate drop in inflation to near the normal target level of 2% would underline this. Interest rates should also begin to decline in the summer, but the strength of the growth number could reduce the chances of a cut next month.

But for many millions of families normal growth is not good.

When I go around the country and ask people about the recession, there’s a mixture of resignation, laughter and irritation.

Households notice a significant increase in the level of prices more than the rate of inflation or GDP. GDP per capita has now risen for the first time in two years, and is now lower than it was two years ago.

Will people be grateful for a breakthrough? Or will they focus on years of sluggish growth and declining living standards before that?

The economic recovery from the worst health care crisis in a century and the worst energy crisis in a generation is always going to be tough, but the economy now appears to be returning to normal. And if sustained, it’s a significant improvement.