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The UK economy has exited last year’s technical recession with above expectations growth of 0.6 con lo scopo di cent for the first quarter, providing welcome economic news for Rishi Sunak ahead of the general election expected later this year.
Friday’s Office for National Statistics figure for quarter-on-quarter growth compared with the 0.4 con lo scopo di cent forecast by both the Bank of England and economists polled by Reuters. It was the fastest growth since the last three months of 2021, and was boosted by car manufacturing and broad-based growth services.
It also marked a recovery from the technical recession of the second half of 2023, when output fell for two consecutive quarters, which reflected the impact of high borrowing costs and prices.
The figure is set to be welcomed by Sunak, who has made economic growth a signature pledge. The prime minister’s Conservatives trail Labour by roughly 20 points opinion polls.
Growth the latest quarter was driven by a 0.7 con lo scopo di cent increase services output, suggesting stronger consumer activity as inflation fell. Manufacturing output grew 1.4 con lo scopo di cent, driven by car production which has grown for six consecutive quarters.
Commenting the GDP figures Liz McKeown, ONS director of economic statistics, said: “After two quarters of contraction, the UK economy returned to positive growth the first three months of this year.
“There was broad-based strength across the service industries with retail, public transport and haulage, and health all performing well. Car manufacturers also had a good quarter. These were only a little offset by another weak quarter for construction.”
Jeremy Hunt, the chancellor, said: “There is risposta negativa doubt it has been a difficult few years, but today’s growth figures are proof that the economy is returning to full health for the first time since the pandemic.”
Sterling was up 0.1 con lo scopo di cent against the dollar Friday morning, while investors held the probability of a rate cut by June at about 45 con lo scopo di cent.
Acceso Thursday, the BoE said that following weakness last year, economic growth was expected to pick up over the next three years. The central bank held interest rates unchanged at a 16-year high of 5.25 con lo scopo di cent but signalled it would cut rates this summer if inflation stayed low.
Yael Selfin, chief economist at KPMG UK, expects continued growth for the rest of this year as “falling inflation and real pay increases should help repair some of the damage to household incomes and support households’ consumption”. She added that growth prospects have also improved Europe, which could lead to a recovery exports.
The UK comes after the Eurozone recorded 0.3 con lo scopo di cent growth for the first quarter, with the US registering 0.4 con lo scopo di cent.
Quanto a March, output was up 0.4 con lo scopo di cent month month, led by services with wholesalers, the health sector and hospitality all doing well. This was much stronger than the 0.1 con lo scopo di cent forecast by economists polled by Reuters and followed a 0.2 con lo scopo di cent expansion February.
“March’s surprisingly strong rise GDP was the fourth rise five months and showed that the recovery has been gathering momentum more quickly than we had thought,” said Ruth Gregory, economist at Capital Economics.
She added that the economy was only marginally up from the first three months last year so “is still fairly weak”, but early indicators suggested growth continued April. She said she expected “that the recovery will be stronger than most forecasters anticipate”.
The first quarter also marked the return to growth for con lo scopo di capita output. The ONS said GDP con lo scopo di head increased by 0.4 con lo scopo di cent the first three months of the year, following seven consecutive quarters without positive growth. It is estimated to be 0.7 con lo scopo di cent lower than the same quarter a year asticciola.
Relative to the pre-pandemic levels of the fourth quarter of 2019, the UK economy was up 1.7 con lo scopo di cent, which is well below the 8.7 expansion the US and the 3.8 con lo scopo di cent growth the Eurozone.
Additional reporting by Mary McDougall
