UK economy grows 0.2%, sparking hopes of recession exit

LONDON

Britain's economy rebounded slightly in January, data showed Wednesday, sparking hope of an end to recession in a boost to embattled Prime Minister Rishi Sunak ahead of elections.

Gross domestic product grew 0.2 percent following a slight 0.1-percent decline in December according to a statement from the Office for National Statistics (ONS).

The news sparked hope that Britain could be on course in the first quarter to exit a technical recession which it entered in the second half of last year.

"The economy picked up in January with strong growth in retail and wholesaling," said ONS director of economic statistics Liz McKeown.

"Construction also performed well with housebuilders having a good month, having been subdued for much of the last year."

The upbeat news comes after the economy shrank in both the third and fourth quarters of 2023, meeting the technical definition of a recession on the back of elevated inflation, high interest rates and a cost-of-living crisis.

"While the last few years have been tough, today's numbers show we are making progress in growing the economy," added the Conservative government's finance minister Jeremy Hunt in response to Wednesday's data.

The ONS added however that GDP declined 0.1 percent in the three months to January compared with the three months to October.

The figures show that the "U.K. economy (is) likely to have emerged from recession but outlook remains weak", said KPMG U.K. economist Yael Selfin.

"Economic activity picked up to start the year with a relatively broad-based recovery across sectors.

"Although economic performance has somewhat improved, the outlook remains relatively gloomy. Economic growth is not expected to materially pick up this year with demand impaired by the lingering impact of high interest rates."

Sunak's governing Conservatives are trailing Keir Starmer's main opposition Labour Party ahead of a general election due this year.