UK Economy Avoids Recession as GDP Growth Returns in January
The UK economy narrowly avoided sliding into recession at the end of last year, according to figures released by the Office for National Statistics (ONS). GDP grew by 0.3% in January, bringing it back to growth following several rocky months that led to a contraction of 0.5% in December. The government is likely to count the figures as a win, with less than one week to go until Jeremy Hunt delivers his spring budget.
The services sector grew by 0.5% in January, after falling by 0.8% in December. The largest contributors to this growth were education, transport and storage, human health activities, and arts, entertainment and recreation activities. Partial recovery from the repercussions of the strikes in December was seen by postal services. Output in consumer-facing services also grew by 0.3%, compared to a fall of 1.2% in December, while production output fell 0.3%, versus a growth of 0.3% the month before.
The ONS said the education sector grew by 2.5% in January, following a fall of 2.6% the month before. This was attributed to the return of more children to school, which is considered to increase the output of the education sector.
Chancellor Jeremy Hunt said: “In the face of severe global challenges, the UK economy has proved more resilient than many expected, but there is a long way to go. Next week, I will set out the next stage of our plan to halve inflation, reduce debt and grow the economy — so we can improve living standards for everyone.”
Rachel Reeves, Labour’s shadow chancellor, declared that the GDP figures illustrate the economy is “inching along this Tory path of managed decline”.
In an effort to counter inflation, the Bank of England has increased interest rates to 4%, the highest they have been since 2008. The upside of this has been advantageous for some savers, yet has caused strain for many homeowners with mortgages.
Overall, today’s figures raise the chances that UK growth could come in flat or only slightly negative in the first quarter overall, making it more likely that the UK avoids a technical recession. Analysts are also expecting the Office for Budget Responsibility to announce next week that the UK will have a shorter and shallower downturn than previously feared.
0. “UK economy rebounds to grow by 0.3% in January” Evening Standard, 10 Mar. 2023, https://www.standard.co.uk/news/politics/uk-economy-gdp-growth-january-ons-bank-b1066200.html
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