UK economy grows 0.1% in first quarter, but inflation continues to weigh
- The UK economy grew by 0.1% in the first quarter, but showed an unexpected contraction of 0.3% in March.
- Construction and industry showed solid growth, but service provision was hit by a decline in wholesale and retail trade, while household incomes remained under pressure.
- The Bank of England said on Thursday it no longer expects Britain to enter a recession this year.
A member of the public walks through heavy rain near the Bank of England in May 2023.
Dan Kitwood | Getty Images News | Getty Images
LONDON – The British economy grew by 0.1 percent in the first quarter, after an unexpected slowdown in March, official figures showed on Friday.
Economists polled by Reuters had predicted the same growth figure for the first three months of the year, but expected stagnation in March, against the fall of 0.3 percent.
The construction sector increased by 0.7%, while manufacturing output rose by 0.5% in the first quarter, with 0.1% growth logged in services and manufacturing. On a monthly basis, services fell by 0.5% in March, mainly due to declines in wholesale and retail trade and car repairs.
The National Bureau of Statistics said there was no growth in real household spending as incomes remained under pressure from higher prices.
UK growth has been subdued so far this year, coming in at 0.4% in January and flat in February, after the economy narrowly avoided a technical recession in 2022.
Inflation remains a more serious concern for the UK than for other major economies, with the March reading still above 10%.
The Bank of England raised interest rates by 25 basis points to 4.5% on Thursday, making its twelfth consecutive increase in a bid to combat stubbornly high rates. More optimistically, the central bank said it no longer expects Britain to enter recession this year, despite earlier forecasts for its longest ever recession.
The Bank of England now forecasts that UK GDP will be flat in the first half of this year, growing 0.9% in mid-2024 and 0.7% in mid-2025.
“It may be the biggest upgrade we’ve ever done,” BoE Governor Andrew Bailey told CNBC on Thursday, defending the revision as the result of a changing picture from contingent data including financial markets, commodity prices and government policy.
“The level is still pretty low, let’s be honest,” Bailey added.
The euro zone recorded just 0.1% growth in the first quarter of the year, with Germany – the bloc’s biggest economy – stagnating.
