The economy escaped a technical recession
Commuters in London.
Jason Alden/Bloomberg via Getty Images
Britain’s economy emerged from recession as gross domestic product grew 0.6% in the first quarter, official figures showed on Friday, exceeding expectations.
Economists polled by Reuters had forecast growth of 0.4% in the previous three months of the year.
The UK entered one shallow recession in the second half of 2023, as persistent inflation continues to hurt the economy.
Even though there isn’t official definition of recessionTwo consecutive quarters of negative growth are considered by many to be a technical recession.
The UK manufacturing sector grew 0.8% between January and March, while construction fell 0.9%. On a monthly basis, the economy grew 0.4% in March, after growing 0.2% in February.
In terms of output, the services sector – crucial to the UK economy – grew for the first time since the first quarter of 2023, the Office for National Statistics said. The 0.7% growth was mainly driven by the transportation services sector, which had its highest quarterly growth rate since 2020.
British Prime Minister Rishi Sunak, who belongs to the Conservative Party recently suffer significant losses at local elections, welcomed the news. “The economy has turned a corner,” he said in a post on social media platform X.
Sunak added: “We know things are still difficult for many people, but the plan is working and we must stick to it.”
Suren Thiru, chief economics officer at ICAEW, a professional group for chartered accountants, offered a more cautious view. He said the positive impact of weaker inflation could be limited by renewed caution in spending amid political uncertainty ahead of a general election expected later this year.
Thiru said: “The UK’s exit from recession is a rather hollow victory as the big picture is still an economy struggling with stagnation, because of poor productivity and a lack of economic activity. High economic conditions are limiting our growth potential.”
Bank of England Monetary Policy Committee on Thursday warning that persistent inflation indicators “remain high” and voted to keep the key interest rate unchanged at 5.25%.
The central bank forecast inflation to reach close to 2% in the near term, but said it expected a slight increase later in the year as the impact of plummeting energy prices wears off.
