UK Economy Inches Along – GDP Grows 0.3% in January
The UK economy grew by 0.3% in January, according to data released by the Office for National Statistics (ONS).[0] This follows a 0.5% contraction in December and marks the first growth in GDP since October 2022.[1] While the figures provide a temporary respite from the period of stagnation, there are still lingering doubts over the long-term outlook.
The main drivers of growth in January were the return of children to classrooms, the Premier League clubs returning to a full schedule after the World Cup, and private health providers.[2] The postal system has partially returned to normal following the disruptions caused by the strikes in December.[3]
The services sector was the main contributor to the growth, growing by 0.5% in January, after falling by 0.8% in December.[4] Education, transport and storage, human health activities, and arts, entertainment and recreation activities all made notable contributions.
In January, production output declined by 0.3%, after having increased by 0.3% in December. Meanwhile, the construction sector decreased by 1.7%, following no change in December.[5]
Darren Morgan, Director of economic statistics at the ONS, said: “The economy partially bounced back from the large fall seen in December. Looking at the broader picture, GDP was flat in the three months to January 2023 when compared with the three months to October 2022.”[6]
Shadow chancellor Rachel Reeves said: “Today's results show our economy is still inching along this Tory path of managed decline.”[3]
Deputy chief UK economist Ruth Gregory from Capital Economics told the BBC: “Looking beneath the surface, the figures suggest the economy is on weaker ground than it appears. So we doubt January's strength will last and our hunch is that there will still be a recession.”[7]
Chancellor Jeremy Hunt said he will set out the next stage of the government's plan to halve inflation, reduce debt and grow the economy when he delivers the spring budget in less than one week.[6]
One rare riser in the market was FirstGroup PLC (LSE:FGP), up 1.8% after it said it anticipated profits for the financial year ending 25 March 2023 would be ahead of previous expectations following strong trading in its bus and rail operations.[8]
Overall, the data suggests that while the UK economy is inching along, there is still a long way to go before it is out of the woods.
0. “GDP grows by 0.3% – but the UK economy remains stagnant” The Spectator, 10 Mar. 2023, https://www.spectator.co.uk/article/gdp-grows-by-0-3-but-the-uk-economy-remains-stagnant/
1. “UK economy's January rebound is good news for the Budget” Reaction, 10 Mar. 2023, https://reaction.life/uk-economys-january-rebound-is-good-news-for-the-budget/
2. “UK economy rebounded in January – Financial News” FinancialNews.co.uk, 10 Mar. 2023, https://financial-news.co.uk/uk-economy-rebounded-in-january
3. “Football and private healthcare help increase GDP by 0.3% in January in boost for Chancellor” Daily Mail, 10 Mar. 2023, https://www.dailymail.co.uk/news/article-11843423/Football-private-healthcare-help-increase-GDP-0-3-January-boost-Chancellor.html
4. “GDP monthly estimate, UK: January 2023” Forex Factory, 10 Mar. 2023, https://www.forexfactory.com/news/1209971-gdp-monthly-estimate-uk-january-2023
5. “Pound Sterling: GDP Growth Beats Expectations, But Outlook against Euro and Dollar Remains Fragile” Pound Sterling Live, 10 Mar. 2023, https://www.poundsterlinglive.com/gbp-live-today/18320-pound-to-euro-and-dollar-uk-gdp-jan-23
6. “UK economy ‘bounces back' in another signal a recession is off the table but experts warn of stagnation” City A.M., 10 Mar. 2023, https://www.cityam.com/uk-economy-bounces-back-in-another-signal-a-recession-is-off-the-table-but-experts-warn-of-stagnation/
7. “The UK Economy Has (Kind Of) Limped Back To Life – So What Does That Mean For You?” HuffPost UK, 10 Mar. 2023, https://www.huffingtonpost.co.uk/entry/uk-economy-explained-recession_uk_640af1bce4b09c5c6d6e2641
8. “FTSE 100 set to tumble at the open after heavy falls in the US; UK GDP rises in January By Proactive Investors” Investing.com UK, 10 Mar. 2023, https://uk.investing.com/news/stock-market-news/ftse-100-set-to-tumble-at-the-open-after-heavy-falls-in-the-us-uk-gdp-rises-in-january-2945493
