The UK economy still presents a “mixed” picture.
In the first three months of the year, economic growth was driven by the services sector, which grew for the first time in a year, the statistics agency said. Transportation services, legal services and scientific research all saw strong growth, but services that include hotels and restaurants declined slightly and the construction sector contracted sharply.
GDP per person increased by 0.4 percent in the first quarter, following seven consecutive quarters of decline.
Yet Britain’s economic data “is incredibly mixed,” said Tera Allas, director of research and economics at McKinsey’s Britain and Ireland office and a former civil service economist. Some sectors like professional services and technology are doing well, but others, like hospitality, have struggled, she said.
The economic situation for consumers is “even murkier,” added Ms. Allas. Sentiment is negative, and by some measures, retail sales are down. But consumer spending remains a key aspect of the country’s economic resilience. Household spending, adjusted for inflation, increased by 0.2%, after two quarters of decline, the statistics agency said.
This can partly be explained by the labor market. Even though interest rates are at their highest level in 16 years, slowing investment and business bankruptcies have increasedunemployment rose only modestly, to 4.2 percent in February, from a recent low of 3.8 percent.
The medium-term outlook is gloomy.
On Thursday, the National Institute of Economic and Social Research said it expected Friday’s economic data to show the recession was “in the rearview mirror” but warned that the long-term outlook for the economy was gloomy. The institute’s economists forecast growth of around 1 percent per year in the medium term.
THE bank of england said the impact of rising interest rates and limited government spending would weigh on the economy, and it forecast growth of 0.5 percent this year. Although policymakers have said rate cuts are on the way, they plan to take a cautious approach, suggesting rates will fall slowly.
The economy is in focus as the general election approaches.
“There is no doubt that the last few years have been difficult, but today’s growth figures are proof that the economy is returning to full health for the first time since the pandemic,” Jeremy Hunt said on Friday. Chancellor of the Exchequer, in a press release. .
A general election will be held in the next eight months and the economy is among the top priorities, with both main political parties pledging to boost growth. Rachel Reeves, of the opposition Labor Party, accused the ruling Conservative Party of ‘wasting’ the British people on improving the economy.
In a speech this week, Ms Reeves said claims the UK economy had turned a corner “do not reflect economic reality” as many people tell her they are struggling to pay bills, high rents or their mortgage repayments.
The benefits of the recovery are being felt unevenly.
For many households, 2024 will also feel like the end of a long-running cost-of-living crisis. Although prices are still higher than before the pandemic and expected to remain so, consumers’ budgets have been somewhat lightened. Average incomes are rising faster than inflation, household energy bills are falling and the government reduced some taxes. On average, living standards, measured by household disposable income, will increase by 6% this year compared to last year, the National Institute for Economic and Social Research announced this week.
But the benefits are not shared by everyone. Households in the lowest income categories will see their standard of living fall further due to the sharp rise in rents, the institute said.
