May 19, 2024

Brighton Journal

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The economy is emerging from a technical recession

The economy is emerging from a technical recession

Passengers in London.

Jason Alden/Bloomberg via Getty Images

Official figures showed on Friday that the British economy emerged from recession, with gross domestic product rising by 0.6% in the first quarter, exceeding expectations.

Economists polled by Reuters had expected growth of 0.4% over the previous three months of the year.

The UK entered a shallow recession in the second half of 2023, as persistent inflation continued to hurt the economy.

Although there is no The official definition of recessionTwo consecutive quarters of negative growth is widely considered a technical stagnation.

The UK production sector expanded by 0.8% in the January-March period, while the construction sector fell by 0.9%. On a monthly basis, the economy grew by 0.4% in March, after a 0.2% expansion in February.

In terms of output, the Office for National Statistics said the services sector – which is crucial to the UK economy – grew for the first time since the first quarter of 2023. The 0.7% growth was mainly driven by the transport services industry which saw its highest quarterly growth rate in 2020.

UK Prime Minister Rishi Sunak, whose Conservative Party recently suffered major losses in 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 that things are still difficult for many people, but the plan is working and we must stick to it.”

Suren Thero, director of economics at the Institute of Chartered Accountants (ICAEW), a professional group for chartered accountants, struck a more moderate tone. He said the positive impact of weak inflation could be limited by renewed caution on spending amid political uncertainty ahead of general elections expected later this year.

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“The UK’s escape from recession is a somewhat hollow victory because the big picture is still one of a stagnant economy, where weak productivity and high economic inactivity limit our growth potential,” Theroux said.

The Bank of England’s Monetary Policy Committee warned on Thursday that persistent inflation indicators “remain high” and voted to keep its key interest rate at 5.25%.

The central bank expects headline inflation to be close to 2% in the near term, but said it expects a slight increase later in the year as the effects of the sharp decline in energy prices fade.