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UK GDP data shows the engine of recovery is still spluttering, with the economy only inching ahead on its path back to full health.

Although the September reading on output came in a couple of notches higher than expected at 0.6%, a downgrade of the growth picture in the summer showed just how much of a struggle there is for the economy to regain its pre-pandemic level.

The sluggish picture is against the backdrop of the easing of social distancing regulations, offering fresh indications that many companies have struggled with the ongoing supply chain crisis and labour shortages.

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Nevertheless the FTSE 100 and the FTSE 250 have gained ground despite the downbeat reading, in expectation that the Bank of England maybe more likely to hold off a sharp tightening of monetary policy in the months to come.

There is no easy manual to follow to make the further repairs needed for the economy and the Bank of England have held off tinkering with interest rates just yet, over worries that could further damage the pistons of recovery.

The stark worry is that with rising energy costs, cuts to benefits, and fresh price rises to come consumers are already starting to feel the pinch and may become cautious in their spending patterns.

Mining stocks are among the biggest gainers so far on the FTSE 100 amid higher inflation readings around the world, partly indicating surges in global demand for goods.

Auto Trader topped the FTSE 100 leader board as revenues revved up in the first half by 82%.

Demand for second hand cars has soared, amid the supply chain shortages affecting new models, turning forecourt online advertising into an even bigger cash cow.

The best ever six month results for the company sent the share price soaring by more than 11% in early trade.

Investors will also be drilling down into the trade figures out today and what they mean for the UK economy.

The transition to a new era of trade post Brexit is still hurting with the trade deficit widening by £3.5 billion to £4.3 billion in the third quarter.

This was propelled by rising imports but falling exports especially to non-EU countries.

There had been high hopes that the UK would find new profitable trading friends around the world, but those relationships have clearly been harder to foster.

The data indicates that the big bounce of recovery appears to be behind the UK, and the next few months are likely to be an upwards struggle to regain pre-pandemic levels as companies and consumers are caught in a pincer grip between rising prices and higher taxes, which may limit interest rate rises next year.

Susannah Streeter
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.
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Susannah Streeter
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

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