The UK economy unexpectedly grew in the fourth quarter of 2024 after flatlining in the third quarter, offering some respite to the UK government, which has orchestrated a slowdown through damaging policy decisions.
The fallout of the autumn budget and generally downbeat economic rhetoric from the UK government was expected to see UK GDP fall 0.1% in the final quarter of last year, so the small expansion will be music to Rachel Reeves’s ears, despite an uninspiring outlook.
“This morning’s UK GDP figures were marginally better than expected, with the economy growing by 0.1% QoQ in the final three months of 2024,” said Michael Brown Senior Research Strategist at Pepperstone.
“That said, such an anaemic pace of economic growth is hardly worth celebrating, and doesn’t materially alter the UK economic outlook.”
Construction was one of the areas that displayed strength in the quarter, with growth of 0.5%, while a 0.2% increase in the services sector helped keep the economy on course.
The small beat of expectations is encouraging for the UK economy, but it will do little to improve the perception of where the UK economy is going in 2025. Recession risks are still present, and the reading has done little to help the Bank of England.
“The data challenges the Bank of England’s decision to halve its growth forecasts for the UK economy this year, although headwinds certainly remain,” said Harry Woolman, Analyst at Validus Risk Management.
“Stagflation remains a real possibility amid underwhelming growth and persistent price pressures, whilst today’s reading, despite being in positive territory, is not exactly a blockbuster print.”
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