What's going on?

A closely watched survey of British firms suggests that economic growth in the UK cooled slightly in January but is still growing at a healthy clip.

What does this mean?

The survey of �services� businesses, which account for 80% of economic activity in the UK, suggested that the overall economy is growing at a quarterly rate of about 0.5% (only a smidgen slower than the 0.6% rate it clocked in the fourth quarter of last year). However, some economists interpreted the data as a sign that higher prices (a.k.a. inflation) are starting to dampen economic activity. For example, when prices go up, people and companies typically buy fewer goods, unless their income is also rising.

Why should I care?

The bigger picture: More clarity around Brexit is helping businesses� confidence.

According to the survey, businesses� confidence in the future is at its highest level in 18 months, and they cite �greater political stability and clarity around Brexit� as part of the reason. While, of course, a huge amount of uncertainty remains, the situation, arguably, is clearer than it was six months ago. Businesses crave clarity because if they know what they are dealing with, they can plan, and spend, accordingly. If the clarity continues to increase, it should provide a positive impact on Britain�s overall economy.


For you personally: Higher inflation could lead to higher interest rates.

Inflation erodes the value of bonds, because the cash that bonds pay their owners in the future is worth less as inflation goes up (i.e. that cash will be able to buy fewer things in the future). As such, investors tend to sell bonds when inflation is expected to increase � thus pushing bond prices down and bond yields up (a.k.a. interest rates) because the two are inversely related (why? click here). The interest rate on loans, like mortgages, is partly tied to government bond yields. So, if inflation keeps climbing, that is likely to feed through into higher loan rates for you.