Jeremy Hunt has been handed a welcome economic boost as he seeks to boost Tory chances at the next election with improved GDP figures that move the UK further away from recession.
Gross domestic product grew again in February, the Office for National Statistics said, while it also upgraded previously released figures for January.
Gross domestic product (GDP) was estimated to rise 0.1 per cent in February, according to the official statisticians.
They also revised the previous estimate for January from 0.2 per cent to 0.3 per cent growth.
However, the good news has been tempered by suggestions the Bank of England will not begin to cut interest rates – reducing the cost of mortgages – in May as previously hoped. It is also thought they will not fall as far as previously hoped.
‘These figures are a welcome sign that the economy is turning a corner, and we can build on this progress if we stick to our plan,’ said Chancellor of the Exchequer Jeremy Hunt.
The Bank of England is now expected to lower rates from the current 16-year high of 5.25 per cent, to 4.75 per cent by Christmas, with the first move not coming until August or September.
At the start of 2024 financial markets were indicating there would be six rate cuts, starting in May.
That would have taken rates down to 3.75 per cent. The dramatic change in outlook comes as global central banks battle to tame inflation having seen it spiral out of control in the wake of the pandemic and war in Ukraine.
The European Central Bank yesterday held rates at 4 per cent in the eurozone, though it set the scene for a cut as soon as June.
The economy appears to be putting the 2023 recession behind it in the new year. A recession is defined by at least two quarters in a row where the economy contracts, as it did in the second half of 2023.
However, after the January and February readings showed growth, if the whole first quarter of 2024 is to be negative then March must show a drop of 1.29 per cent or more.
‘These figures are a welcome sign that the economy is turning a corner, and we can build on this progress if we stick to our plan,’ said Chancellor of the Exchequer Jeremy Hunt.
The production side of the economy was strong, contributing the most to the UK’s overall growth as output from the sector rose 1.1 per cent in February, compared to a 0.3 per cent fall in January.
Construction sector output fell by 1.9 per cent.
‘The economy grew slightly in February with widespread growth across manufacturing, particularly in the car sector,’ said ONS director of economic statistics Liz McKeown.
‘Services also grew a little with public transport and haulage, and telecommunications having strong months.
‘Partially offsetting this there were notable falls across construction as the wet weather hampered many building projects.’
