‘Technical recession confirmed but UK economy on track to rebound’

UK consolidated GDP figures have been released this morning, confirming a 0.2% rise in January

 
Rob Morgan, Chief Investment Analyst at Charles Stanley, comments: “GDP is estimated to have fallen by an unrevised 0.3% in the fourth quarter of 2023, and by an unrevised 0.1% in the third quarter, underscoring that the UK fell into a technical recession in the second half of last year.

“Overall, 2023 was a disappointing year for the UK economy with little growth in the first half and a small contraction in the second half. However, it could now be on the road to a tentative recovery.
 

Has the recession ended?

 
“GDP expanded by 0.2% in January 2024, a promising start and perhaps indicative of an economy regaining momentum. It was driven by a new year rebound in the services sector, construction and a reinvigorated consumer. Manufacturing was an area of disappointment but may well have been held back by supply chain disruption owing to the conflict in the Middle East.

“However, we must await data for February and March to confirm whether the UK has already pulled out of the recession in second half of 2023.

“Importantly, having battled the impact of stubborn inflation and high interest rates, many households are now starting to benefit from inflation falling more rapidly than wage growth. Retail sales figures for January showed sales volumes were up 3.4% month-on-month, offsetting a steep fall seen in December.

“Amid a resilient jobs market, a boost to spending power in real terms bodes well for growth in the coming months. Recently announced tax cuts and the planned increase in the National Living Wage in April also stand to offset the headwind of higher interest rates and pull the UK out of its shallow recessionary dip.”