UK Economy Exits Recession with 0.6% Growth in First Quarter

Official figures released on Friday revealed that the U.K. economy has emerged from recession, with gross domestic product (GDP) rising by 0.6% in the first quarter, surpassing expectations.

Economists surveyed by Reuters had anticipated a growth of 0.4% for the quarter.

The U.K. slipped into a mild recession in the latter part of 2023, fueled by persistent inflation that continued to impact economic performance.

While there is no formal definition of a recession, two consecutive quarters of negative growth are commonly regarded as indicative of a technical recession.

During the January to March period, the production sector of the U.K. expanded by 0.8%, while construction contracted by 0.9%. On a monthly basis, the economy grew by 0.4% in March, following a 0.2% expansion in February.

In terms of output, the services sector, pivotal to the U.K. economy, recorded growth for the first time since the first quarter of 2023, according to the Office for National Statistics. The 0.7% growth was primarily driven by the transport services industry, experiencing its highest quarterly growth rate since 2020.

U.K. Prime Minister Rishi Sunak, amidst significant losses for his Conservative Party in local elections, welcomed the news, stating, “The economy has turned a corner.” He emphasised the importance of adhering to the current economic plan despite ongoing challenges.

Suren Thiru, economics director at ICAEW, took a more cautious stance, highlighting the potential impact of political uncertainty ahead of anticipated general elections later this year on consumer spending.

The Bank of England’s Monetary Policy Committee, in its latest announcement, underscored the persistent inflationary pressures, opting to maintain the main interest rate at 5.25%. While near-term headline inflation is forecasted to hover around 2%, the central bank anticipates a subsequent uptick later in the year as the effects of reduced energy prices diminish.

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