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The growth of wholesale and retail trade helped improve the economy.
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The UK economy returned to growth in January after falling into a shallow recession in the second half of 2023, official data showed, providing Prime Minister Rishi Sunak with some respite ahead of this year’s election.
Gross domestic product grew 0.2% on the month – driven by a rebound in the retail and homebuilding sectors – after falling 0.1% in December, in line with economists’ expectations in a Reuters poll.
“The economy rebounded in January with strong growth in retail and wholesale trade,” said Liz McKeown, director of the Office for National Statistics. “The construction sector also performed well, with housebuilders having a good month after weakness for much of last year.”
However, it is too early to tell whether the economy is no longer in recession. GDP contracted by 0.3% in the fourth quarter of 2023, and by 0.1% in the previous quarter, which meets the technical definition of a recession.
The UK economy has been somewhat sluggish since its initial recovery from the Covid-19 pandemic, hit by higher energy import costs due to Russia’s invasion of Ukraine and, more recently, higher bank interest rates from England.
But with inflation at 4% in January, below double-digit rates for much of last year, and expected to return to the 2% target soon, the pressure on household spending is easing and the central bank is starting to consider when to cut interest rates.
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