Economic Statistics Office
British economy ends recession – growth is surprisingly strong
Status: 10.05.2024 | Reading time: 2 minutes
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The British economy had contracted in the previous two quarters. But the recession is now over. Growth has been surprisingly good recently. Fresh impulses could come from the English central bank.
The British economy ended its recession with surprisingly strong growth in the first quarter. The gross domestic product increased by 0.6 percent from January to March compared to the previous quarter, as the ONS statistics office announced its first estimate in London on Friday.
Experts surveyed by the Reuters news agency had only expected an increase of 0.4 percent. In the previous two quarters, the British economy contracted slightly twice in a row and thus slipped into a technical recession.
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Economic output is now 1.7 percent higher than at the end of 2019, the last quarter before the outbreak of the corona pandemic. “It has been a difficult few years, but today’s growth figures are evidence that the economy has fully recovered for the first time since the pandemic,” said Finance Secretary Jeremy Hunt.
Support from the Bank of England
The Bank of England has just raised its forecast for economic growth this year. According to this, gross domestic product this year will rise by 0.5 percent, twice as much as expected in February. The central bank itself could provide fresh impetus for the economy: in view of declining inflation, it is heading for its first interest rate cut in more than four years.
As expected, the Bank of England left its key interest rate on Thursday at 5.25 percent, the highest level since 2008. At the same time, central bank chief Andrew Bailey was “optimistic that things are moving in the right direction”. He believes a first interest rate cut is possible as early as June. That is “neither impossible nor a fait accompli,” Bailey said. So far, the markets had only been betting on a turnaround in interest rates in August.
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Britain’s inflation rate fell to 3.2 percent in March – its lowest level in two and a half years. The monetary authorities are aiming for a value of two percent. “We expect it to be close to target in the coming months,” Bailey said. “That’s encouraging.”