UK economy grows by 0.1% in the first quarter but inflation continues to weigh

A member of the general public walks by way of heavy rain close to the Financial institution of England in Could 2023.

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LONDON — The U.Okay. financial system grew by 0.1% within the first quarter, following an sudden contraction in March, official figures confirmed on Friday.

Economists polled by Reuters had forecast the identical development determine for the primary three months of the 12 months, however anticipated stagnation in March, versus the 0.3% fall recorded.

The development sector expanded by 0.7%, whereas manufacturing efficiency went up by 0.5% within the first quarter, with 0.1% development logged in providers and manufacturing. On a month-to-month foundation, providers dropped by 0.5% in March, notably due to declines in wholesale and retail commerce and motor repairs.

The nationwide statistics company mentioned there was no development in actual family expenditure, as incomes remained below the squeeze of upper costs.

Persistent inflation

U.Okay. development has been muted up to now this 12 months, coming in at 0.4% in January and flat in February, after the financial system narrowly averted a technical recession in 2022.

Inflation stays a extra extreme blight on the U.Okay. than on different main economies, with the March studying nonetheless above 10%.

The Financial institution of England on Thursday raised rates of interest by 25 foundation factors to 4.5% making its twelfth consecutive hike in an try to fight stubbornly excessive costs. Extra optimistically, the central financial institution mentioned it not expects the U.Okay. to enter a recession this 12 months, regardless of beforehand forecasting its longest-ever recession.

The Financial institution of England now forecasts the U.Okay. GDP can be flat over the primary half of this 12 months, rising 0.9% by the center of 2024 and 0.7% by mid-2025. 

“It could be the largest improve we have ever carried out,” BoE Governor Andrew Bailey advised CNBC on Thursday, defending the revision as the results of a altering image from conditional knowledge, together with monetary markets, commodity costs and authorities coverage.

“The extent remains to be fairly low although, let’s be sincere,” Bailey added.

The euro zone recorded simply 0.1% development within the first quarter of the 12 months, with Germany — the bloc’s greatest financial system — stagnating.

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