UK Sees Modest Economic Growth in Early 2024

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Britain’s economy showed signs of recovery in January, marking a slight growth after a mild recession in the latter part of 2023, according to official data. The modest upturn provides some relief to Prime Minister Rishi Sunak amidst expectations of an upcoming election this year.

Gross domestic product (GDP) increased by 0.2% month-on-month, driven by a resurgence in retail activity and house-building, following a 0.1% decline in December, in line with economists’ projections. Liz McKeown, a director at the Office for National Statistics, noted that January saw robust growth in retail and wholesaling.However, it remains uncertain if the economy has fully emerged from recession. GDP contracted by 0.3% in the final quarter of 2023 and by 0.1% in the preceding quarter, meeting the technical definition of a recession.

Britain’s economy has faced challenges, including soaring energy costs due to Russia’s invasion of Ukraine and elevated Bank of England interest rates. Nevertheless, with inflation easing to 4% in January and projected to return to the 2% target soon, pressure on household spending is alleviating.

Following the release of the GDP figures, the pound weakened against the U.S. dollar and the euro, with investors increasingly anticipating a rate cut, possibly as early as June.Although recent economic indicators show improvement, forecasts by the Office for Budget Responsibility and business surveys suggest a cautious optimism, with expectations of a modest expansion in 2024. Despite the positive momentum, analysts believe a rate cut by the Bank of England this summer remains likely, driven by diminishing domestic inflationary pressures.