London commuter.
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The British economy emerged from recession in the first quarter with a better-than-expected 0.6% rise in gross domestic product (GDP), officials said on Friday.
Economists polled by Reuters had expected growth of 0.4% in the previous three months of the year.
The UK entered a shallow recession in the second half of 2023 as persistent inflation continues to take its toll on the economy.
There is no official definition of a recession, but two consecutive quarters of negative growth is widely considered a technical recession.
The UK’s productive sector rose 0.8% in the January to March period, while the construction sector fell 0.9%. On a monthly basis, the economy grew 0.4% in March, following a 0.2% expansion in February.
In terms of output, the services sector, which is vital to the UK economy, grew for the first time since the first quarter of 2023, the Office for National Statistics said. The 0.7% growth was primarily driven by the transportation services industry, which saw its highest quarterly growth rate since 2020.
British Prime Minister Rishi Sunak, whose Conservative party suffered a major defeat in recent local elections, welcomed the news. “The economy has reached a turning point,” he said in a post on social media platform X.
“We know things remain difficult for many people, but the plan is working and we must stick to it,” Sunak added.
Suren Thiru, economics director at ICAEW, the professional group of chartered accountants, struck a more cautious tone. He said the positive impact of weakening inflation could be dampened by renewed caution on spending amid political uncertainty ahead of general elections expected later this year.
“The UK’s exit from recession is a somewhat hollow victory, because the bigger picture is that it is one of those economies suffering from recession because its growth potential is limited by low productivity and lack of high economic activity,” Thiru said.
The Bank of England’s monetary policy committee warned on Thursday that persistent inflation measures remained high and voted to keep its benchmark interest rate at 5.25%.
The central bank forecast headline inflation to be close to 2% in the near term, but said it expected inflation to rise slightly later in the year as the effect of the plunge in energy prices wears off.
