May 23, 2024

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The UK is shaking out of recession as the economy grows faster than expected

The UK is shaking out of recession as the economy grows faster than expected

The Central Bureau of Statistics said that in the first three months of the year, economic growth was driven by the services sector, which expanded for the first time in a year. Transportation services, legal services, and scientific research grew strongly, but services including hotels and restaurants declined slightly, and the construction sector contracted sharply.

GDP per capita grew by 0.4 percent in the first quarter, after seven consecutive quarters of decline.

British economic data is “incredibly mixed,” said Tera Alas, director of research and economics at McKinsey’s UK and Ireland office and a former civil service economist. She said some sectors such as professional services and technology were doing well, but others such as hospitality faced difficulties.

Ms Allas added that the economic picture for consumers was “bleaker”. Sentiment is negative, and by some measures, retail sales are down. But consumer spending remains a key aspect of the country’s economic resilience. The statistics agency said household spending, adjusted for inflation, grew by 0.2 percent after two quarters of decline.

Some of this can be explained by the labor market. Even as interest rates rose to their highest levels in 16 years, investment slowed, and corporate bankruptcies increased, unemployment rose only modestly, to 4.2% in February, after reaching a recent low of 3.8%.

The National Institute of Economic and Social Research said Thursday it expects Friday’s economic data to show a recession is “in the rearview mirror” but warned that the long-term outlook for the economy was sluggish. Economists at the institute expect growth of about 1 percent annually in the medium term.

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The Bank of England said that the impact of rising interest rates and restricting public spending will affect the economy, and it expected growth of 0.5 percent this year. Even as policymakers say interest rate cuts are on their way, they plan to take a cautious approach, suggesting interest rates will fall slowly.

“There is no doubt that it has been a difficult few years, but today’s growth figures are evidence that the economy is returning to full health for the first time since the pandemic,” Jeremy Hunt, the Treasury secretary, said in a statement on Friday. .

A general election is scheduled within the next eight months, and the economy will be among the top priorities, with both major political parties pledging to stimulate growth. Rachel Reeves of the opposition Labor Party He accused the ruling Conservative Party of “singling the spotlight” on the British people About the improvement of the economy.

In a speech this week, Ms Reeves said claims that the UK economy had turned a corner “do not reflect economic reality”, with many people telling her they were struggling to pay bills, rising rents or mortgage repayments.

In 2024, many families will feel they are emerging from a long cost-of-living crisis. Although prices are still higher than they were before the pandemic, and are expected to stay that way, there has been some relief on consumers’ budgets. Average incomes are rising faster than the rate of inflation, household energy bills are falling, and the government has cut some taxes. On average, living standards, measured by household disposable income, will rise by 6 percent this year compared to last, the National Institute of Economic and Social Research said this week.

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But the benefits are not shared by everyone. Households in lower income groups will see a greater decline in their living standards as they face sharp rises in rents, the institute said.