UK GDP has grown 0.2% in January, latest data from the Office for National Statistics (ONS) has shown.
The number is hardly one to get excited about and a continuation of the trend that we’ve seen over the past couple of years, according to Danni Hewson, AJ Bell head of financial analysis, who said that it shows an economy “bumping along the bottom, flatlining and stagnating”.
However, it’s a better outcome than a recession, which the UK had entered at the end of 2023.
“Psychologically shedding the label of recession is important because it helps foster confidence,” said Hewson.
“But the biggest shot of adrenaline is likely to come once the Bank of England finally delivers the much-anticipated interest rate cut that markets are expecting in the summer.”
The reading was generated by a better start to the year for the services and construction sectors, explained Quilter Investors investment strategist Lindsay James, who thinks that this could represent “the start of a slightly more positive period for the UK”.
“Inflation is expected to fall in the coming months, due in part to a lower energy price cap, which could help alleviate the pressure on UK households and support the recovery of the consumer-driven economy,” she said.
With this in mind, the UK inflation print next week will be closely watched by the Bank of England ahead of its interest rate decision the following day. However, the slight uptick in monthly GDP “does little to reduce the pressure on the central bank, but we can expect it to stand firm for a while longer yet”.
Hetal Mehta, head of economic research at St. James’s Place, didn’t buy into the moderate optimism either.
“It’s too early to say that the technical recession is over,” he said. “The bigger picture is still that the economy remains weak; there is still some interest rate pass through to come and weak growth in Europe doesn't help.”