UK to bid recession farewell as debate over state of the economy heats up
New figures out this week are set to show that last year’s shallow recession has come to an end as political debate about the state of the economy heats up.
Economists expect figures released on Friday to show that the UK grew 0.1 per cent in March, meaning it will have notched a 0.4 per cent expansion over the first quarter of the year.
This will mean the UK will have exited last year’s shallow recession, in which GDP dropped by 0.4 per cent across the second half of 2023.
It will also mean the economy outperformed the Bank of England’s expectations for the first quarter. The Monetary Policy Committee expected growth of 0.1 per cent over the first quarter.
“The economic recovery in Q1-24, in our view, likely reflects in part some positive payback following the surprising Q4-23 GDP contraction, as well as a genuine lift in activity driven by positive household and business sentiment,” Sanjay Raja, chief UK economist at Deutsche Bank said.
Forward-looking indicators suggest the recovery has further to run. S&P’s purchasing managers’ index (PMI), a closely watched business survey, accelerated to 54.1 in April. Anything above 50 indicates an expansion.
April’s figures were roughly in line with the 1998-to-2019 average and are consistent with GDP rising at a quarterly rate of 0.4 per cent.
A number of economists have argued that the improving outlook for households will contribute to a stronger recovery as the year progresses.
Peter Arnold, EY UK Chief Economist, said: “The EY ITEM Club expects the underlying momentum in the economy to gradually build throughout the year, as real household incomes continue to improve.”
The Conservatives have put an economic recovery at the heart of their faltering election pitch. Rishi Sunak has repeatedly argued that falling inflation and improving growth show that the “plan is working”, warning that changing government would risk the recovery.
However, in a speech set to be delivered later today, Rachel Reeves is expected to say that the Conservatives are “deluded” and have been “gaslighting” the public.