The UK’s emergence from recession during the first three months of the year was stronger than initial figures suggested, according to official data.
In an update to its first growth estimate, the Office for National Statistics (ONS) said gross domestic product (GDP) increased by 0.7% between January and March.
Originally, on May 10, he had said that production rose 0.6% in the previous three months – a positive number that put an end to the shallow recession that hit during the second half of 2023.
Then, the effects of the Bank of England’s interest rate increases to combat inflation were widely blamed by economists as stifling demand.
All growth during the January-March period was attributed to the services sector, which represents almost 80% of the economy.
We have since learned that there were zero growth recorded by the ONS for the month of April, with bad weather affecting works and main streets.
The data is the latest from the ONS before the country goes to the polls on July 4 – with the economy, and especially personal finances, among the top topics on voters’ minds following the effects of the COVID pandemic and the cost of living driven by the energy crisis.
The timing of the general election coincided with a fierce debate over whether the Bank should now reduce interest rates, allowing for a reduction in borrowing costs.
At its last political meeting just over a week ago, the rate-setting committee voted 7-2 to keep the bank rate at 5.25%.
The minutes of the meeting revealed continued concerns about the pace of wage growth and stubborn inflation in services.
The Bank fears that a rate increase at this stage risks fueling further price growth, as basic wages grow at a rate of 6%.
The fee of inflation is currently back to the 2% target for the first time in three years.
Despite this disparity in favor of consumers, with wage growth outpacing inflation since June last year, the effects of the crises since 2020 have taken their toll, according to defenders of living standards.
The Resolution Foundation said on Friday that real household disposable income was lower at the start of 2024 than it was at the end of 2019.
It said growth so far in this parliament has been weaker than in all but two parliaments since 1910, despite growth of 2.4% last year.
The think tank stated that average incomes were £120 lower per year per person during the period since the last election.
Numbers like these strike at the heart of the election campaign, but they also give ammunition to critics of the Bank of England who argue that interest rates should fall.
As things stand, financial markets and economists view August or September as the likely months for the first rate cut, barring any further shocks.
The Bank estimated last week that the economy would expand by 0.5% in the period from April to June, despite the delay reported for April itself.
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