The UK economy shook off the recessionary environment in January and returned to growth as consumer spending rose and construction activity boosted growth.
UK GDP grew 0.2% in January after falling 0.1% in December.
“The UK economy snapped back to growth in January, adding fuel to the fire of speculation that the recession will indeed be super-short and ultra-mild,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.
“The latest snapshot showed that GDP was estimated to have come in at 0.2%, and while the economy is hardly shooting the lights out in terms of growth, there will be relief that light has emerged at the end of a difficult tunnel for many companies.”
The sectors associated with sogginess last year were the ones at the forefront of growth this year. A well documented slow down in the UK property market showed signs of reversal and consumer spending perked up after a poor December.
“It’s noteworthy that sectors like construction, retail, and wholesale have contributed to this growth, showing pockets of resilience within the economy,” said Richard Flax, Chief Investment Officer at Moneyfarm.
However, before everyone gets overly excited about progress in the economy, Paula Bejarano Carbo, Economist at National Institute of Economic and Social Research highlighted the average growth over the three months to the end of January was still negative and suggested much more was needed for sustained growth in the UK economy.
“While this seems positive, GDP fell by 0.1 per cent in the three months to January in line with our forecast last month,” explained Paula Bejarano Carbo.
“In broader terms, UK economic growth has been near-zero since 2022 and GDP per head remains lower than pre-Covid. To escape the low-growth trap, structural changes are needed, such as an increase in public investment, particularly in infrastructure, education and health – which would also support growth in business investment.”