Britain emerged from recession as the economy grew faster than expected

The UK economy is still a “mixed” picture.

In the first three months of the year, economic growth was driven by the service sector, which grew for the first time in a year, the statistics agency said. Transportation services, legal services and scientific research all grew strongly, but services including hotels and restaurants fell slightly and the construction industry fell sharply.

GDP per capita increased 0.4% in the first quarter, after seven consecutive quarters of decline.

However, UK economic data is “very mixed”, said Tera Allas, director of research and economics at McKinsey’s UK and Ireland office and a former civil service economist. Some sectors such as professional services and technology are doing well, she said, but others such as hospitality are struggling.

The economic picture for consumers is “even gloomier,” Ms. Allas added. Sentiment is negative and by some measures retail sales are falling. But consumer spending remains a key aspect of the country’s economic resilience. Household spending, adjusted for inflation, rose 0.2% after two quarters of decline, the statistics agency said.

Some of that can be explained by the labor market. Even as interest rates are at a 16-year high, investment is slowing and Business bankruptcies are on the riseThe unemployment rate increased only modestly, to 4.2% in February, up from a recent low of 3.8%.

The medium-term outlook remains bleak.

On Thursday, the National Institute of Economic and Social Research said it predicted that economic data on Friday would show a recession “in the rearview mirror” but warned that the economy’s long-term outlook The economy is sluggish. Economists at the institute forecast growth of about 1% per year over the medium term.

The Bank of England said the impact of higher interest rates and limited public spending would weigh on the economy and forecast 0.5% growth this year. Even as policymakers say rate cuts are on the way, they still plan to take a cautious approach, which suggests interest rates will fall slowly.

The economy is in focus ahead of the general election.

Jeremy Hunt, the Chancellor of the Exchequer, said in a statement on Friday: “There is no doubt that it has been a difficult few years, but today’s growth figures are evidence that the economy is is returning to a healthy state for the first time since the pandemic.” .

A general election is due within eight months and the economy is one of the top priorities, with both main political parties pledging to boost growth. Rachel Reeves of the opposition Labor Party, accused the ruling Conservative Party of “taunting” the British people about the improving economy.

In a speech this week, Ms Reeves said claims the UK economy had reached a dead end “did not speak to the economic reality” as many people told her they were having difficulty paying their bills. application, high rent or mortgage payments.

The benefits of the recovery are being felt unevenly.

For many households, 2024 will also feel like it is emerging from a prolonged cost of living crisis. While prices remain higher than before the pandemic and are expected to continue to do so, consumer budgets have softened somewhat. Median incomes are rising faster than inflation, household energy bills are falling and The government has cut some taxes. The National Institute of Economic and Social Research said this week that average living standards, measured by household disposable income, will increase 6% this year compared with last.

But the benefits are not shared among everyone. Households in the lowest income bracket will see their living standards fall further as they face sharp increases in rent, the institute said.