By Chris Dorrell
The UK took its first steps out of recession after the economy returned to growth in January, raising hopes that last year’s contraction is already over.
The UK economy grew 0.2 per cent in January, according to figures from the Office for National Statistics (ONS), in line with economists’ expectations.
This was driven by a strong performance from the UK’s all-important services sector, which expanded 0.2 per cent helping to offset a 0.2 per cent fall in production. Construction meanwhile jumped 1.1 per cent in January.
The figures will raise hopes that the UK is already moving out of the shallow recession it fell into in the second half of last year. A technical recession is two consecutive quarters of negative growth.
The UK economy has been largely stagnant over the past 18 months as it has battled stubborn inflation and high interest rates
The benchmark Bank Rate stands at a post-financial crisis high of 5.25 per cent, having been hiked from just 0.1 per cent at the end of 2021. This has sent a chill through the economy as households and businesses struggle under the burden of higher borrowing costs.
However, inflation has fallen sharply from its peaks while the Bank of England is expected to start cutting interest rates later this year.
A number of economists are hopeful that lower inflation and falling interest rates will lay the groundwork for a stronger performance this year.
Analysts at Pantheon Macroeconomics forecast that real disposable income would rebound 2.2 per cent in 2024, which would help consumer spending to rise two per cent in the year.
