The Workplace for Nationwide Statistics studies that GDP grew by 0.3% throughout January, after shrinking by 0.5% in December.
That’s a quicker restoration than anticipated after the financial system stalled within the closing quarter of 2022.
Analysts had anticipated modest development of simply 0.1% as strike motion and the price of dwelling disaster prevented a restoration in shopper and enterprise exercise.
The most recent GDP determine might give the chancellor, Jeremy Hunt, a slight increase earlier than subsequent week’s price range, when he’ll set out the federal government’s tax and spending insurance policies.
It additionally provides to problem dealing with the chancellor to satisfy his goal to get authorities debt falling as a share of GDP. The nation is the one one amongst its G7 friends that has not but recovered its pre-pandemic dimension.
Darren Morgan, ONS director of financial statistics, stated the financial system had “partially bounced again” from the massive fall seen in December.
“Throughout the final three months as an entire and, certainly during the last 12 months, the financial system has, although, confirmed zero development,” he stated.
“The primary drivers of January’s development have been the return of kids to school rooms, following unusually excessive absences within the run-up to Christmas, the Premier League golf equipment returned to a full schedule after the top of the World Cup and personal well being suppliers additionally had a robust month,” Morgan added.
“Postal providers additionally partially recovered from the results of December’s strikes.” These components have been partly offset by a pointy drop in development attributable to a slowdown in infrastructure initiatives and housebuilding, partly due to heavy rainfall.
A lift in spending throughout the soccer World Cup helped maintain development in constructive territory within the closing quarter of final 12 months, Workplace for Nationwide Statistics figures present. The rise went in opposition to economists’ expectations to maintain the UK out of a recession, which is outlined as two consecutive quarters of adverse development.
The most recent official figures will feed into the Workplace for Price range Duty’s outlook for the financial system, which is because of be revealed together with the chancellor’s tax and spending plans on Wednesday. The official forecaster warned in November that the UK confronted two years of document falls in dwelling requirements and is predicted to downgrade its forecasts for development within the medium time period.
The Financial institution of England nonetheless expects a downturn this 12 months however it’s predicted to be shallower and shorter than earlier estimates.
Hunt stated: “Within the face of extreme world challenges, the UK financial system has proved extra resilient than many anticipated, however there’s a lengthy option to go.
“Subsequent week, I’ll set out the following stage of our plan to halve inflation, cut back debt and develop the financial system – so we are able to enhance dwelling requirements for everybody.’’
Yael Selfin, chief economist at KPMG UK, stated a recession is “nonetheless on the playing cards regardless of a brightening outlook”.
“The marked fall in wholesale gasoline costs and easing of provide chain disruptions supplied a fine addition to financial prospects in the beginning of 2023,” she stated. “However this is probably not ample to stave off a recession within the first half of this 12 months, as shopper spending stays weak with households persevering with to be squeezed by elevated costs and better rates of interest.”
Selfin added that the downturn is predicted to be shallower and shorter than beforehand thought, with enterprise confidence set to enhance as inflation falls, supporting development within the second half of the 12 months.
Inflation fell to 10.1 per cent in January, down from a 41-year excessive of 11.1 per cent in October, and is predicted to at the very least halve by the top of the 12 months.
Ben Jones, CBI Lead Economist, stated:“The slight rebound in development in the beginning of the 12 months wasn’t altogether stunning, given the sharp drop in December. However exercise is more likely to be subdued within the near-term, given the headwinds of excessive inflation, still-high power costs and rising rates of interest. Nonetheless, sentiment is enhancing, and enterprise leaders are hopeful of a extra secure working setting later this 12 months.
“The federal government ought to use the forthcoming price range to beat the prevailing financial headwinds by tackling the limitations holding companies again. This consists of fixing labour shortages by reforming childcare and serving to convey extra working mother and father again into the workforce, in addition to discovering a alternative to the tremendous deduction forward of the deliberate six-point improve in company tax.”
George Lagarias, Chief Economist at Mazars feedback: “We are able to’t actually say we’re too stunned that UK GDP development exceeded expectations for January. For one, shoppers have been stronger than beforehand anticipated, as tight employment situations imply that wage development is considerably catching up with inflation. Moreover, exterior demand from the massive world economies, such because the US and China, has been stronger than anticipated.
“Whereas the broader financial backdrop might be probably the most tough in a technology and we might see extra weak point forward, we expect that pessimism at the start of the 12 months might have been overdone. Having stated that, we count on situations to stay unstable and tepid till inflation comes down sufficiently.”