The Office for National Statistics (ONS) has announced that the UK economy is now out of recession, based on official figures. According to the ONS, gross domestic product (GDP) grew by 0.6% between January and March, exceeding economists’ predictions of 0.4%. This growth has been attributed to a variety of factors, including increased consumer spending power, falling energy bills, lower mortgage rates, and tax cuts.
In response to the news, Prime Minister Rishi Sunak expressed optimism about the state of the economy. In an interview with Sky News’s Ed Conway, he stated, “I am pleased that while there’s more work to do, today’s figures show that the economy now has real momentum, and I’m confident that with time, people will start to feel the benefits of that.” Sunak also acknowledged that there are still challenges ahead, but he is confident that the economy is “getting healthier every week.”
The declaration of a recession in February was based on two consecutive three-month periods of economic contraction. This was preceded by a 0.3% decrease in GDP between October and December and a 0.1% decline from July to September. The slump has been attributed to reduced consumer spending power due to high inflation and energy bills, as well as unfavorable weather conditions.
The latest figures also show better-than-expected growth for March, with GDP increasing by 0.4% during the month. Additionally, the ONS has revised GDP growth figures for February from 0.1% to 0.2%. While past recessions have been prolonged, the current one was anticipated to be shorter in duration.
Chancellor Jeremy Hunt described the figures as “encouraging” and stated that they demonstrate the economy’s return to full health. He urged the public to trust in the decisions made by the government, stating, “They trust us to do the right thing for the long-term benefit of the economy and that is what we’ve been doing.”
However, opposition parties have expressed a less optimistic view. Labour’s shadow chancellor Rachel Reeves stated, “This is no time for Conservative ministers to be doing a victory lap and telling the British people that they have never had it so good.” Liberal Democrat Treasury spokesperson Sarah Olney also criticized the government’s handling of the economy, stating, “This Conservative government crashed the economy and sent mortgages spiraling.”
Liz McKeown, director of economic statistics at the ONS, noted that the service industries, including retail, public transport, and health, have shown strong performance, while the construction industry has experienced another weak quarter. She also highlighted the positive performance of car manufacturers. In March, the economy continued to grow, led by the service industries, with wholesalers, the health sector, and hospitality all performing well.
Ruth Gregory from research firm Capital Economics believes that the latest figures suggest a stronger economic recovery for the UK than previously anticipated. She also noted that the upcoming inflation and labor market releases will play a significant role in determining the timing of the first interest rate cut, despite the Bank of England’s decision to hold interest rates at 5.25% on Thursday and issue new forecasts for the economy. The Bank’s projections show stronger growth this year, with lower unemployment and inflation rates than previously expected.
