Modest growth for UK economy after dip into recession

Shoppers buy food in a supermarket in London, Wednesday, Aug. 17, 2022.
Shoppers buy food in a supermarket in London, Wednesday, Aug. 17, 2022. Copyright Frank Augstein/AP.
Copyright Frank Augstein/AP.
By Eleanor Butler
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Strong spending in the services sector has seen the UK return to growth.


The UK's gross domestic product (GDP) rose by 0.2% in the month to January, according to data released by the Office for National Statistics on Wednesday.

The GDP indicator, which measures the nation's output, offers a glimpse of hope after the UK fell into a shallow recession last year, marked by two consecutive quarters of economic contraction.

"While the [overall growth] figure is tiny, the fact it is growing at all is a positive," said Russ Mould, investment director at AJ Bell.

"Investors want the UK's recession status cast into the rear-view mirror so they can focus on how potential looser monetary policy could provide relief to consumers and businesses, and in turn feed into greater economic activity."

Analysts would consider the recession to be over if the economy expands in the first three months of the year, meaning that the UK is not out of the woods just yet - but the recent data is a start.

This month's rise was primarily driven by activity in the services sector, as shoppers splashed the cash in supermarkets and on the High Street.

Services output grew by 0.2% in January, while output in the construction industry was also up by 1.1%.

In December, both of these sectors shrunk by 0.1% and 0.5% respectively.

Lagging behind other industries was the production sector, which recorded a contraction of 0.2% in January, after expanding by 0.6% in December.

The modest overall rise in the growth figure will come as a relief to the governing Conservative Party ahead of an expected election this year, although the economy remains in a fragile state.

Compared with the same month last year, overall GDP is estimated to have fallen by 0.3% in January 2024, partially driven by record-high borrowing costs.

The Bank of England has not yet indicated when it will be bringing rates down, although cooling economic indicators are likely to encourage policy makers.

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