- The British economy grew by 0.1% in the first quarter, but showed an unexpected contraction of 0.3% in March.
- Construction and manufacturing showed strong growth, but services were hit by declines in wholesale and retail trade, while household incomes remained constrained and strikes stunted growth.
- The Bank of England said on Thursday that it no longer expects the UK to enter recession this year.
A member of the public walks through heavy rain near the Bank of England in May 2023.
Dan Kitwood | Getty Images News | Getty Images
Official figures on Friday showed that Britain’s economy expanded by 0.1% in the first quarter, after an unexpected contraction in March.
Economists polled by Reuters had expected the same growth figure for the first three months of the year, but they expected a recession in March, against a 0.3% decline recorded.
The construction sector grew by 0.7%, while manufacturing rose by 0.5% in the first quarter, with growth of 0.1% in services and production. On a monthly basis, services fell 0.5% in March, mainly due to declines in wholesale and retail trade and auto repair.
The national statistics agency said there was no growth in real household spending, as incomes remained under pressure from rising prices.
The quarterly figure “suggests that low real income and high interest rates, as well as unusually wet weather, are dampening activity,” Ruth Gregory, deputy chief economist at UK Capital Economics, said in a note, also citing a widespread strike this year. . Rate that dips In government consumption and net trade make it a “bleak reading”.
“There is no recession yet, but with the full drag of higher interest rates yet to be felt, it’s too soon to sound completely clear-cut,” added Gregory.
UK growth has been weak so far this year, registering 0.4% in January and flat in February, after the economy narrowly avoided a technical recession in 2022.
Inflation remains a more serious scourge for the UK than for other major economies, with the March reading still above 10%.
The Bank of England on Thursday raised interest rates by 25 basis points to 4.5%, its 12th consecutive increase, in a bid to combat stubbornly high rates. More optimistically, the central bank said it no longer expects the UK to enter recession this year, despite previously predicting the longest recession on record.
The Bank of England now expects UK GDP to be flat during the first half of this year, growing by 0.9% by mid-2024 and 0.7% by mid-2025.
“This may be the biggest update we’ve ever done,” Bank of England Governor Andrew Bailey told CNBC on Thursday, defending the revision as a result of the changing picture from conditional data, including on financial markets, commodity prices and government policy.
“The level is still pretty low, let’s be honest,” Bailey added.
The eurozone posted growth of just 0.1% in the first quarter of the year, with Germany – the bloc’s largest economy – stagnating.
