UK Exits
Recession With Fastest Growth in Nearly Three Years
Britain’s
economy grew by the most in nearly three years in the first quarter of 2024,
ending the shallow recession it entered in the second half of last year and
delivering a boost to Prime Minister Rishi Sunak ahead of an election. Gross
domestic product expanded by 0.6% in the three months to March, the Office for
National Statistics said, the strongest growth since the fourth quarter of 2021
when it rose by 1.5%. The data was welcomed by Sunak who said the economy had
“turned a corner”, while the opposition Labour Party, which has a
large lead in opinion polls, accused Sunak and
finance minister Jeremy Hunt of being out of touch. “There is no doubt it
has been a difficult few year, but today’s growth figures are proof that the
economy is returning to full health for the first time since the
pandemic,” Hunt said. Labour contested those claims.
“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,” said Rachel Reeves,
who hopes to succeed Hunt as finance minister after an election expected later
this year. First-quarter economic growth was faster than the 0.3% in the
euro zone and the 0.4% quarterly growth in the
United States. However, Britain has still had one of the slowest recoveries
from the effects of the coronavirus pandemic among major advanced economies,
exacerbated by a surge in European natural gas prices after Russia invaded
Ukraine in 2022.
At the
end of the first quarter of 2024, the country’s economy was just 1.7% bigger
than its level in late 2019, before the pandemic, with only Germany in the G7
faring worse. “Despite the better near-term outlook, the improvement in
GDP growth looks likely to be constrained by the ongoing weakness in
productivity growth as well as reduced scope to increase employment
levels,” Yael Selfin, chief economist at KPMG UK, said.
The
first-quarter growth exceeded all forecasts in a Reuters poll of 39 economists
which had pointed to a 0.4% expansion of gross domestic product in the
January-to-March period, after GDP shrank by 0.3% in the final quarter of 2023.
Friday’s data also showed that GDP in March was 0.7% higher than a year
earlier, above expectations of a 0.3% rise.
The
Bank of England, which held interest rates at a 16-year high on Thursday, had
forecast quarterly growth of 0.4% for the first quarter and a smaller 0.2% rise
for the second quarter, and a weak expansion of just 0.5% for 2024 as a whole. Officials
on the BoE’s Monetary Policy Committee signalled the central bank could shift
to cutting rates as early as June, but some economists suggested on Friday that
stronger GDP growth could delay the Bank’s efforts and stoke inflation.
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“This
is likely to be a surprise to the MPC and may result in upward revisions to
inflation at the next Monetary Policy Report,” economists at Japanese bank
Nomura said. Sterling strengthened against the U.S. dollar after Friday’s ONS
figures were released.
