Earlier in March, Chancellor Jeremy Hunt presented his budget. He was proud that the UK had escaped a "technical recession." "The declinists have been wrong," Hunt declared, "and the optimists right."

This recession may not be a technical one, but with inflation at 10 percent and rising interest rates, it feels like one. 

Politicians and central bankers usually try to encourage economic growth, however a recession could be necessary to stop runaway inflation. The UK economy is still quietly moving forward, which may mean that inflation could be harder to reduce than anticipated.

In fact, headline inflation rose in February as there has been no reduction in food and energy costs. Core inflation (the figure that excludes food and energy costs) has also increased, suggesting that it may be more difficult to get rid of underlying inflation pressure.

It is worth noting, too, that the UK has an average vacancy rate exceeding 1.1 million jobs. This is putting upward pressure upon wages even if wage growth is still behind inflation.

In the UK, the second-half of 2022 witnessed volatile GDP figures, which was due to a number of unexpected events.

The economy contracted in September due to the extra bank holiday for the funeral of the late Queen. In November, the GDP grew, apparently due to money being spent by viewers of the football World Cup. December's contraction was attributed to increased industrial action, and perhaps because there were fewer strikes, January's GDP seen growth.

There are some good signs. There are glimmers of good news in both the manufacturing and services industries and the overall business confidence indicator has also shown positive movements.

However, outside of this volatility, the economy is in a state of stagnation at around 0%. Although a stagnation may be better than the winter recession many expected, the outlook for the future is tough.

Even if there is no technical recession, inflation will create a wind chill factor that will make it feel like recession. According to the Bank of England, unemployment must rise to bring us back to inflation of around 2.2%. The Bank of England has increased interest rates from 0.1% in November 2021, to 4.25% now - despite the poor economic outlook.

The economy has yet to feel the full effects of higher rates, particularly in relation to house prices. House prices are a solid indication of how wealthy people feel and we would expect further slowing of the UK economy when the effects are felt and house prices slow down due to rising mortgage costs.

This should cause higher unemployment numbers and reduced growth in wages, which is what the Bank of England is looking for. This will help bring inflation under control so that interest rates can be reduced once more. It will be painful, however, as people will have less money to pay for high heating, electricity, and grocery bills.

The UK's economy continues to withstand recession despite these economic pressures. This nation continues to shop, borrow money, create new products and create demand for those products. In all the doom and gloom, it is easy to forget that the UK has the third largest technology sector in the world. It continues to be a force across many industries, from fashion to healthcare to construction.

As we look at the possibility of another year of poor economic performance, policy makers have the responsibility to look beyond the current problems and implement strategies that boost productivity and build the UK's economy.

All eyes will be on the important inflation numbers for now. If it continues, then another interest rate increase in May will be likely.