- The UK economy grew 0.1% in the first quarter but posted an unexpected 0.3% contraction in March.
- Construction and manufacturing showed solid growth, but the service sector suffered from declines in wholesale and retail trade while household incomes remained under pressure.
- The Bank of England said Thursday it no longer expects Britain to slide into recession this year.
A citizen walks in heavy rain near the Bank of England in May 2023.
Dan Kitwood | Getty Images News | Getty Images
LONDON – The British economy grew 0.1% in the first quarter after an unexpected contraction in March, official figures showed on Friday.
Economists polled by Portal had forecast the same growth figures for the first three months of the year but expected stagnation in March while a 0.3% decline was recorded.
Construction grew 0.7%, while manufacturing output rose 0.5% in the first quarter, with services and manufacturing posting growth of 0.1%. On a monthly basis, services fell 0.5% in March, mainly due to declines in wholesale, retail and auto repairs.
The national statistics agency said there was no increase in real household spending as incomes remained under pressure from higher prices.
UK growth has been subdued so far this year, coming in at 0.4% in January and flat in February after the economy narrowly avoided a technical recession in 2022.
Inflation continues to hurt the UK more than other major economies, with the reading still above 10% in March.
The Bank of England hiked interest rates 25 basis points to 4.5% on Thursday, the 12th straight hike to counter persistently high prices. Even more optimistic was the central bank’s statement that it no longer expects the UK to fall into recession this year, despite previously forecasting the longest recession on record.
The Bank of England now forecasts UK GDP to be flat in the first half of this year, growing by 0.9% by mid-2024 and by 0.7% by mid-2025.
“It could be the biggest update we’ve ever made,” BoE Governor Andrew Bailey told CNBC on Thursday, defending the revision as the result of a changing picture from conditional data including financial markets, commodity prices and government policies.
“The level is still pretty low though, let’s be honest,” Bailey added.
The euro zone grew by just 0.1% in the first quarter of the year, while Germany – the Union’s largest economy – stagnated.