The Workplace for Nationwide Statistics stories 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 progress of simply 0.1% as strike motion and the price of dwelling disaster prevented a restoration in shopper and enterprise exercise.
The newest GDP determine may give the chancellor, Jeremy Hunt, a slight enhance 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 going through 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 over the past 12 months, the financial system has, although, confirmed zero progress,” he stated.
“The primary drivers of January’s progress have been the return of youngsters to lecture 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 companies additionally partially recovered from the consequences of December’s strikes.” These components have been partly offset by a pointy drop in development attributable to a slowdown in infrastructure tasks and housebuilding, partly due to heavy rainfall.
A lift in spending in the course of the soccer World Cup helped hold progress in optimistic territory within the closing quarter of final yr, Workplace for Nationwide Statistics figures present. The rise went towards economists’ expectations to maintain the UK out of a recession, which is outlined as two consecutive quarters of destructive progress.
The newest official figures will feed into the Workplace for Finances 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 file falls in dwelling requirements and is predicted to downgrade its forecasts for progress within the medium time period.
The Financial institution of England nonetheless expects a downturn this yr 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 strategy to go.
“Subsequent week, I’ll set out the subsequent stage of our plan to halve inflation, scale 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 fuel costs and easing of provide chain disruptions offered a great addition to financial prospects firstly of 2023,” she stated. “However this will not be ample to stave off a recession within the first half of this yr, 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 progress within the second half of the yr.
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 a minimum of halve by the top of the yr.
Ben Jones, CBI Lead Economist, stated:“The slight rebound in progress firstly of the yr wasn’t altogether stunning, given the sharp drop in December. However exercise is prone to be subdued within the near-term, given the headwinds of excessive inflation, still-high power costs and rising rates of interest. Nevertheless, sentiment is bettering, and enterprise leaders are hopeful of a extra steady working surroundings later this yr.
“The federal government ought to use the forthcoming price range to beat the prevailing financial headwinds by tackling the boundaries holding companies again. This consists of fixing labour shortages by reforming childcare and serving to carry extra working dad and mom again into the workforce, in addition to discovering a alternative to the tremendous deduction forward of the deliberate six-point enhance in company tax.”
George Lagarias, Chief Economist at Mazars feedback: “We will’t actually say we’re too shocked that UK GDP progress exceeded expectations for January. For one, shoppers have been stronger than beforehand anticipated, as tight employment situations imply that wage progress 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 essentially the most tough in a era and we may see extra weak spot forward, we predict that pessimism originally of the yr could have been overdone. Having stated that, we anticipate situations to stay risky and tepid till inflation comes down sufficiently.”