How does the weather affect economic growth and what could it mean for you?

The UK economy appears to have recovered from the brief recession it experienced at the end of 2023.

While this is good news, there are a range of factors that can affect economic growth, not least of which being the notoriously unreliable British weather. Indeed, economists believe that rainy weather in April was to blame when Gross Domestic Product (GDP) fell flat for the month.

Read on to learn more about how the weather can affect economic growth and what this could mean for your finances.

April showers appear to have rained off economic growth this year

At the end of 2023, the UK experienced a brief recession before quickly bouncing back in Q1 of 2024. The House of Commons reports that the economy grew by 0.7% in Q1 compared with Q4 of 2023. This is the fastest rate of growth since the recovery from the Covid pandemic.

Initial signs suggested that this growth would continue into Q2, and March certainly seemed to deliver on this. The Office for National Statistics (ONS) found that GDP grew by 0.4% in March, but growth flatlined in April.

A Reuters report suggests that rainy weather was to blame for the sudden halt in economic growth. In particular, the weather seemed to weigh on the construction sector and on retail.

Fortunately, the ONS has shared that the economy returned to growth in May, growing by 0.4%, but it remained flat in June.

The weather can influence a range of economic factors that all affect Gross Domestic Product

You might think of the economy as a lot of numbers on a screen – reports, data, and figures that are far removed from everyday life. But this couldn’t be further from the truth.

GDP is one way to measure the health of the economy. It’s calculated using the value of:

• Goods and services produced or manufactured in the UK
• Goods and services that consumers, businesses, and the government have bought
• Income generated, including business profits.

When you support a large or small business by purchasing goods or services from them, you are directly contributing to the health of the economy.

With this in mind, you can see how even seemingly unrelated events such as the weather might affect the economy.

April 2024 was particularly wet. As such, you might not have wanted to venture out to the high street to look round the shops or visit a local café. So, profits and expenditure fell.

On the other hand, when the sun shines, you might be more likely to make plans with friends. Maybe you decide to have lunch in a pub garden or treat yourselves to a weekend away on the coast.

Of course, the economy is influenced by countless different factors, big and small, and the weather is just one of these.

So, a rainy month doesn’t necessarily mean growth will stall. Likewise, sunny weather may not be enough to cause growth. But, as you can see from the examples above, rain and sunshine can still affect GDP in a significant way.

Your planner can help you to build a plan that protects your wealth regardless of economic performance

It can be nerve-racking to see headlines about poor economic performance, particularly so soon after the UK has come out of a recession. The key thing to remember is that, by working with a financial planner, you’ve already taken steps to protect your wealth from economic underperformance.

Some of the ways you might have done this include:

• Reducing the level of high-interest debt you have
• Building an emergency fund to help you cover unexpected costs or a drop in income
• Diversifying your investment portfolio to mitigate the risk of a sector or asset class underperforming.

So, regardless of how the weather or any other factors affect the economy, you can feel confident in your ability to achieve your long-term goals.

Get in touch

To find out more about how we can help you to grow your wealth and achieve your long-term goals, please get in touch.

Email us at info@harperlees.co.uk or call 01277 350560 to start the conversation.

Please note

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

The value of your investments (and any income from them) 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.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.