UK sees best growth in 3 years
B ritain
bounced back strongly from a shallow recession, providing some relief for Prime Minister Rishi Sunak who has so far struggled to deliver on his promise to grow the economy.
Gross domestic product jumped 0.6% in the first quarter compared to the previous three months, the Office for National Statistics said yesterday. That was the best reading since late 2021, when the UK loosened lockdown restrictions, and higher than the 0.4% expansion forecast by economists.
Shoppers returned to stores, and a lack of strikes boosted transport in the first quarter. Business investment also was much stronger than expected. Growth in the month of March alone was 0.4%, well above expectations due to a bounce back in both services and manufacturing.
“The worst is behind the UK economy,” said Yael Selfin, chief economist at KPMG UK. “Forward looking indicators point to further momentum in the coming months, consistent with our view that.”
The pound slightly extended gains after the data, but the move was soon pared. The currency was up less than 0.1% to $1.2533.
The figures marked a decisive end to the mildest recession in almost 70 years — a decline of 0.4% peak-to-trough in the second half of last year.
RARE BIT OF GOOD NEWS
An upturn in economic activity is a rare bit of good news for the ruling Conservative Party after a difficult few weeks. It suffered heavy losses in the local elections, including a flagship mayoralty in the West Midlands, and has seen two of its MPs defect to the opposition Labour party.
Chancellor of the Exchequer Jeremy Hunt said the figures were “proof that the economy is returning to full health for the first time since the pandemic.”
While Sunak made spurring growth one of his key pledges after entering Number 10, the economy has struggled in the face of the worst cost of living crisis in generations and high interest rates.
Sunak and Hunt have claimed the economy turned the corner in early 2024 as they attempt to quell discontent among MPs over the Conservatives’ dire polling before a national vote. With the Tories facing a 20-point plus deficit behind the opposition Labour party, Sunak has pointed to sharp falls in inflation, lower energy bills and growing wages as signs that the economy is back on track.
“With falling inflation boosting households’ spending power, as well as opening the way for a reduction in interest rates in the months ahead, the economy should be able to sustain some momentum through the year,” said CBI lead economist Ben Jones.
Output per head grew 0.4% in the first three months of the year, ending a series of seven consecutive quarters without positive growth.
Even so, GDP per head is estimated to be 0.7% lower than the same quarter a year ago.
“This is no time for Conservative ministers to be doing a victory lap and telling the British people that they have never had it so good,” Labour’s chancellor-in-waiting, Rachel Reeves, said in a statement. “The economy is still £300 smaller per person than when Rishi Sunak became prime minister.”