Commuters in London.
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Britain’s economy emerged from recession as gross domestic product rose 0.6% in the first quarter, official figures showed on Friday, beating expectations.
Economists polled by Reuters had forecast growth of 0.4% for the previous three months of the year.
The UK entered a shallow recession in the second half of 2023 as persistent inflation continued to weigh on the economy.
Although there is no official definition of a recession, two consecutive quarters of negative growth are generally considered a technical recession.
The UK manufacturing sector grew by 0.8% in the January-March period, while the construction sector fell by 0.9%. On a monthly basis, the economy grew 0.4% in March, following growth of 0.2% in February.
In terms of manufacturing, the services sector – which is 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 driven primarily by the transportation services industry, which posted the highest quarterly growth rate since 2020.
British Prime Minister Rishi Sunak, whose Conservative Party recently suffered significant losses in local elections, welcomed the news. “The economy has turned the corner,” he said in a post on the social media platform X.
“We know it is still difficult for many people, but the plan is working and we must stick with it,” Sunak added.
Suren Thiru, economics director at ICAEW, an accounting professional group, struck a more measured tone. He said the positive impact of weaker inflation could be offset by renewed purchasing restraint amid political uncertainty ahead of general elections expected later this year.
“The UK’s escape from recession is a rather hollow victory as the bigger picture remains one of an economy struggling with stagnation as poor productivity and high levels of economic inactivity limit our growth potential,” Thiru said.
The Bank of England’s monetary policy committee warned on Thursday that indicators of persistent inflation “remain elevated” and voted to keep its key interest rate at 5.25%.
The central bank forecast headline inflation near 2% in the near term, but said it expects a slight increase later in the year as the impact of a sharp fall in energy prices fades.
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2024-05-10 07:02:47
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