Economy emerges from a technical recession

The U.K. economy has emerged from recession as gross domestic product rose 0.6% in the first quarter, official figures showed Friday, beating expectations.

Economists polled by Reuters had forecast growth of 0.4% on the previous three months of the year.

The U.K. entered a shallow recession in the second half of 2023, as persistent inflation continued to hurt the economy.

Although there is no official definition of a recession, two straight quarters of negative growth is widely considered a technical recession.

The U.K.’s production sector expanded by 0.8% in the period from January to March, while construction fell by 0.9%. On a monthly basis, the economy grew by 0.4% in March, following 0.2% expansion in February.

In output terms, the services sector — crucial to the U.K. economy — grew for the first time since the first quarter in 2023, the Office for National Statistics said. The 0.7% growth was mainly driven by the transport services industry which saw its highest quarterly growth rate since 2020.

U.K. Prime Minister Rishi Sunak, whose Conservative Party recently suffered significant losses at local elections, welcomed the news. “The economy has turned a corner,” he said in a post on social media platform X.

“We know things are still tough for many people, but the plan is working, and we must stick to it,” Sunak added.

Suren Thiru, economics director at ICAEW, a professional group for chartered accountants, struck a more measured tone. He said the positive impact of weaker inflation could be curtailed by a renewed caution to spend amid political uncertainty ahead of general elections expected later this year.

“The UK’s escape from recession is a rather hollow victory because the big picture remains one of an economy struggling with stagnation, as poor productivity and high economic inactivity limits our growth potential,” said Thiru.

The Bank of England’s Monetary Policy Committee on Thursday warned that indicators of persistent inflation “remain elevated,” and voted to keep its main interest rate at 5.25%.

The central bank forecast headline inflation close to 2% in the near-term, but said it expects an increase slightly later in the year as the effects of a sharp fall in energy prices wear off.