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The UK economic system exited final yr’s technical recession with sooner than anticipated development of 0.6 per cent for the primary quarter of 2024, offering welcome financial information for Rishi Sunak forward of the final election.
The quarter-on-quarter development determine was the quickest since 2021 and boosted by automobile manufacturing and broad-based development in companies. It beat the 0.4 per cent forecast by the Financial institution of England and economists polled by Reuters.
The GDP numbers launched by the Workplace for Nationwide Statistics on Friday marked the UK’s formal restoration from the shallow recession of the second half of 2023, when output barely fell for 2 consecutive quarters, hit by excessive borrowing prices and costs.
“The UK economy started the year with a bang,” stated Henry Prepare dinner, economist on the monetary firm MUFG. He added that the nation had “managed to navigate the energy crisis and period of rapid monetary tightening without experiencing a protracted downturn”.
The 0.6 per cent determine additionally represented the strongest development for any G7 nation with accessible knowledge, evaluating with 0.3 per cent for the Eurozone over the identical interval and 0.4 per cent for the US.
The information was a lift for Sunak, who final yr made financial development certainly one of his 5 key pledges to the British public. The prime minister’s Conservatives path Labour by roughly 20 factors in opinion polls.
Jeremy Hunt, chancellor, hailed the GDP knowledge as “proof that the economy is returning to full health for the first time since the pandemic”.
However Rachel Reeves, Labour’s shadow chancellor, stated it was “no time for Conservative ministers to be doing a victory lap”, including that the economic system was “still £300 smaller per head” than when Sunak grew to become prime minister.
Development within the first quarter was pushed by a 0.7 per cent enhance in companies output, suggesting stronger shopper exercise as inflation fell. Manufacturing output grew 1.4 per cent, pushed by automobile manufacturing, which has grown for six consecutive quarters.
Liz McKeown, ONS director of financial statistics, stated the figures confirmed “broad-based strength across the service industries”, together with retail, public transport and well being, though building carried out weakly.
Sterling was up 0.1 per cent towards the greenback on Friday morning, whereas buyers attributed a likelihood of about 45 per cent to a price reduce by June.
The BoE stated on Thursday that development was anticipated to select up over the following three years. It held rates of interest unchanged at a 16-year excessive of 5.25 per cent however signalled it will reduce charges this summer season if inflation stayed low.
Yael Selfin, chief economist at KPMG UK, stated falling inflation and actual phrases pay enhance would assist development proceed for the remainder of this yr. She added that financial prospects had additionally improved in continental Europe, which may result in a restoration in exports.
The quarterly GDP determine was boosted by 0.4 per cent month-on-month development for March, when companies corresponding to wholesalers, the well being sector and hospitality all did effectively. March output was a lot stronger than the 0.1 per cent forecast for the month by economists polled by Reuters and adopted a 0.2 per cent enhance in February.
“March’s surprisingly strong rise in GDP was the fourth rise in five months and showed that the recovery has been gathering momentum more quickly than we had thought,” stated Ruth Gregory, economist at Capital Economics.
She added that the economic system was solely marginally up from the primary three months final yr so “is still fairly weak”, however early indicators recommended development continued in April.
The primary quarter additionally marked the return to development for per capita output. The ONS stated GDP per head elevated by 0.4 per cent within the first three months of the yr, following seven consecutive quarters with out optimistic development. GDP per capita is estimated to be 0.7 per cent decrease than in the identical quarter a yr in the past.
Family consumption returned to development after contracting within the earlier two quarters with rising spending in housing, hospitality and recreation.
General the UK economic system has grown 1.7 per cent for the reason that fourth quarter of 2019, instantly earlier than the pandemic. That’s far lower than the 8.7 per cent development within the US for a similar interval and the three.4 per cent enhance within the Eurozone.
This text’s reference to Eurozone development since 2019 has been up to date to replicate the altering membership of the only forex space
Extra reporting by Mary McDougall
