The Workplace for Nationwide Statistics studies that GDP grew by 0.3% throughout January, after shrinking by 0.5% in December.
That’s a sooner restoration than anticipated after the economic system stalled within the ultimate quarter of 2022.
Analysts had anticipated modest progress of simply 0.1% as strike motion and the price of dwelling disaster prevented a restoration in shopper and enterprise exercise.
The most recent GDP determine may give the chancellor, Jeremy Hunt, a slight increase earlier than subsequent week’s funds, when he’ll set out the federal government’s tax and spending insurance policies.
It additionally provides to problem going through the chancellor to satisfy his goal to get authorities debt falling as a share of GDP. The nation is the one one amongst its G7 friends that has not but recovered its pre-pandemic dimension.
Darren Morgan, ONS director of financial statistics, mentioned the economic system had “partially bounced again” from the massive fall seen in December.
“Throughout the final three months as an entire and, certainly over the past 12 months, the economic system has, although, confirmed zero progress,” he mentioned.
“The principle drivers of January’s progress had been the return of youngsters to lecture rooms, following unusually excessive absences within the run-up to Christmas, the Premier League golf equipment returned to a full schedule after the top of the World Cup and personal well being suppliers additionally had a robust month,” Morgan added.
“Postal providers additionally partially recovered from the consequences of December’s strikes.” These components had been partly offset by a pointy drop in development because of a slowdown in infrastructure tasks and housebuilding, partly due to heavy rainfall.
A lift in spending throughout the soccer World Cup helped maintain progress in constructive territory within the ultimate quarter of final 12 months, Workplace for Nationwide Statistics figures present. The rise went in opposition to economists’ expectations to maintain the UK out of a recession, which is outlined as two consecutive quarters of damaging progress.
The most recent official figures will feed into the Workplace for Finances Accountability’s outlook for the economic system, which is because of be printed together with the chancellor’s tax and spending plans on Wednesday. The official forecaster warned in November that the UK confronted two years of file falls in dwelling requirements and is predicted to downgrade its forecasts for progress within the medium time period.
The Financial institution of England nonetheless expects a downturn this 12 months however it’s predicted to be shallower and shorter than earlier estimates.
Hunt mentioned: “Within the face of extreme international challenges, the UK economic system has proved extra resilient than many anticipated, however there’s a lengthy strategy to go.
“Subsequent week, I’ll set out the following stage of our plan to halve inflation, cut back debt and develop the economic system – so we will enhance dwelling requirements for everybody.’’
Yael Selfin, chief economist at KPMG UK, mentioned a recession is “nonetheless on the playing cards regardless of a brightening outlook”.
“The marked fall in wholesale fuel costs and easing of provide chain disruptions offered a fine addition to financial prospects firstly of 2023,” she mentioned. “However this might not be ample to stave off a recession within the first half of this 12 months, as shopper spending stays weak with households persevering with to be squeezed by elevated costs and better rates of interest.”
Selfin added that the downturn is predicted to be shallower and shorter than beforehand thought, with enterprise confidence set to enhance as inflation falls, supporting progress within the second half of the 12 months.
Inflation fell to 10.1 per cent in January, down from a 41-year excessive of 11.1 per cent in October, and is predicted to a minimum of halve by the top of the 12 months.
Ben Jones, CBI Lead Economist, mentioned:“The slight rebound in progress firstly of the 12 months wasn’t altogether shocking, given the sharp drop in December. However exercise is prone to be subdued within the near-term, given the headwinds of excessive inflation, still-high power costs and rising rates of interest. Nonetheless, sentiment is enhancing, and enterprise leaders are hopeful of a extra secure working surroundings later this 12 months.
“The federal government ought to use the forthcoming funds to beat the prevailing financial headwinds by tackling the boundaries holding companies again. This contains fixing labour shortages by reforming childcare and serving to carry extra working mother and father again into the workforce, in addition to discovering a alternative to the tremendous deduction forward of the deliberate six-point improve in company tax.”
George Lagarias, Chief Economist at Mazars feedback: “We are able to’t actually say we’re too stunned that UK GDP progress exceeded expectations for January. For one, customers have been stronger than beforehand anticipated, as tight employment situations imply that wage progress is considerably catching up with inflation. Moreover, exterior demand from the massive international economies, such because the US and China, has been stronger than anticipated.
“Whereas the broader financial backdrop might be probably the most troublesome in a technology and we may see extra weak spot forward, we predict that pessimism in the beginning of the 12 months might have been overdone. Having mentioned that, we count on situations to stay unstable and tepid till inflation comes down sufficiently.”