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Relief for Rishi Sunak? UK economy returns to growth at start of 2024

Britain’s economy returned to growth at the start of 2024, offering some relief to Prime Minister Rishi Sunak ahead of an election expected this year, after it entered a shallow recession in the second half of 2023, official data showed.

Britain's Prime Minister Rishi Sunak (AFP)
Britain’s Prime Minister Rishi Sunak (AFP)

British gross domestic product grew by 0.2% month-on-month in January – boosted by a rebound in retailing and house-building – after a fall of 0.1% in December, in line with economists’ expectations in a Reuters poll.

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“The economy picked up in January with strong growth in retail and wholesaling. Construction also performed well with housebuilders having a good month, having been subdued for much of the last year,” Liz McKeown, statistician at the Office for National Statistics, said.

However, it is too early to know if the economy is no longer in recession. GDP shrank by 0.3% in the final quarter of 2023 and 0.1% in the quarter before – meeting the technical definition of recession widely used in Europe.

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Britain’s economy has been very sluggish since its initial recovery from the COVID-19 pandemic, beset by a surge in the cost of energy imports from Russia’s invasion of Ukraine and, more recently, by high Bank of England interest rates.

Wednesday’s data showed that GDP in January was 0.3% lower than a year earlier and shrank by 0.1% in the three months to January, both in line with economists’ forecasts.

“While the last few years have been tough, today’s numbers show we are making progress in growing the economy,” British finance minister Jeremy Hunt, said.

The government’s Office for Budget Responsibility last week forecast an expansion of 0.8% in 2024, more than the BoE’s forecast of around 0.25% growth.

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