The economy of the United Kingdom has left the recession zone, as evidenced by the fact that in the first quarter of the current year, the local gross domestic product (GDP) showed growth of 0.6% compared to the previous three months.
The relevant information was released by the Office for National Statistics on Friday, May 10. It is also worth noting that the mentioned result for the first quarter of 2024 exceeded preliminary expectations. Analysts interviewed by the media predicted that the GDP of the United Kingdom for January-March of the current year will show growth of 0.4% compared to the last three months of 2023.
For the UK, a minor recession became an objective economic reality in the second half of last year. In this case, a technical recession is implied. The corresponding concept describes the state of affairs in which the economic system is on the trajectory of a negative dynamic for two consecutive quarters.
The production sector of the United Kingdom in January-March of the current year showed growth of 0.8%. At the same time, the sphere of construction in the first quarter of 2024 was on a downward trajectory. This area of activity showed a decline of 0.9%.
The UK economy grew by 0.4% in March, compared with an increase of 0.2% a month earlier.
Data from the Office for National Statistics also shows that output in the services sector, a crucial indicator for the United Kingdom’s economic system, increased for the first time since the first quarter of 2023. In this case, a growth of 0.7% was recorded. This result is largely due to activity in the transport services sector, which has demonstrated the highest quarterly increase rates since 2020.
The Prime Minister of the United Kingdom, Rishi Sunak, whose Conservative party faced significant losses in local elections, commented positively on the data released by the Office for National Statistics, posting on his account on the social network X a publication stating that the dynamic of the country’s economic system has changed its vector. He also noted that many citizens are still in a difficult financial situation. At the same time, Rishi Sunak said that the economic recovery plan is working and it must be adhered to.
Suren Thiru, Director of Economics at ICAEW, a professional group of chartered accountants, took the data on the dynamic GDP of the United Kingdom in the first quarter of 2024 very cautiously. According to the expert, the positive impact of a lower inflation rate may be canceled due to renewed caution in spending funds amid political uncertainty ahead of the general elections, which are expected at the end of the current year.
Suren Thiru also reckons that the United Kingdom’s exit from recession is not a significant victory, because the local economy is still struggling with stagnation. In this context, the expert separately noted that the low level of productivity and high economic inactivity limit the potential for economic growth in the UK.
The Monetary Policy Committee of the Bank of England on Thursday, May 9, stated that the indicators of persistent inflation remain elevated and voted to maintain its main interest rate at 5.25%. In the near term, the financial regulator of the United Kingdom forecasts headline inflation at about 2%. At the same time, the Bank of England expects that the mentioned indicator will show a slight increase later this year, as the effects of a sharp drop in energy prices will weaken.
Matt Britzman, equity analyst at Hargreaves Lansdown, says that against the background of data on the dynamic GDP of the United Kingdom for the first quarter of 2024, investors are beginning to pay attention to British business and see reasons for optimism. The expert also separately noted that economic growth exceeded expectations, but not so much as to increase concerns about the risk of a sharp intensification of inflation.
Yael Selfin, chief economist at KPMG UK, suggests. that the most difficult period for the United Kingdom is in the past. In this case, it implies an improvement in the economic situation. The expert expects that the dynamic of the growth will be observed over the coming months.
As we have reported earlier, UK Retail Sales Demonstrate Positive Dynamic.
