GrowthMar 10 2023

GDP up 0.3% as UK economy beats expectations

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GDP up 0.3% as UK economy beats expectations
Last month, chancellor Jeremy Hunt branded the UK economy resilient after narrowly missing a recession in 2022 [TOLGA AKMEN/EPA-EFE/Shutterstock]

In January the UK economy rebounded, beating expectations following a decline in December.

Gross domestic product (GDP) was up 0.3 per cent in the first month of 2023, after it fell 0.5 per cent in the run up to Christmas.

The rebound seems largely down to the UK services sector, which was up 0.5 per cent after falling 0.8 per cent in December. 

Despite the good news for now, a recession remains very much on the horizon as the UK enters a period of contraction.William Marsters, Saxo UK

Meanwhile, construction fell by 1.7 per cent, and production by 0.3 per cent.

Looking at the broader picture, the Office for National Statistics said GDP has been flat in the three months to January 2023. 

Head of Investment Research at Wealth Club, Jonathan Moyes, said GDP growth beat expectations by 0.2 percentage points in January, having tipped the month for just 0.1 per cent growth.

“It may take a great deal more expectation-beating data to shift the bleak expectations for the UK economy,” said Moyes.

“However, a quiet, more optimistic, consensus does appear to be forming. The economic outlook is much improved, energy prices are falling sharply, China is reopening, and interest rate expectations have eased significantly. 

“All eyes will now turn to Jeremy Hunt and the Spring Budget next week. With a chorus of voices calling for some relief from the highest tax burden in living memory, will the Treasury spend this unexpected growth windfall?”

Last month, the chancellor branded the UK economy resilient after narrowly missing a recession towards the end of last year amidst zero growth.

Senior sales trader at Saxo UK, William Marsters, said with a recession almost a done deal a few months back, he agreed with Hunt that the economy has fought back strongly with the likes of the services sector performing well in recent weeks.

But also like Hunt, Marsters does not think the UK is out of the woods quite yet.

“Despite the good news for now, a recession remains very much on the horizon as the UK enters a period of contraction,” Marsters explained.

“A number of companies such as Sky, Taylor Wimpey and Ford have already announced job cuts in recent weeks, which could be a telling sign for what’s to come.

“Interest rates are also expected to be hiked again by the Bank of England later this month, with which a significant rise could tip the scales.”

ruby.hinchliffe@ft.com