Economy has ‘real momentum’, ‘confident’ PM says – as UK exits recession

The UK economy is no longer in recession, according to official figures.

Gross domestic product (GDP) grew by a better-than-expected 0.6% between January and March, the Office for National Statistics (ONS) said.

Economists had predicted the figure would be 0.4%.

Prime Minister Rishi Sunak said it showed the economy had “turned a corner”.

He told Sky News’s Ed Conway: “I am pleased that while there’s more work to do, today’s figures show that the economy now has real momentum, and I’m confident that with time, people will start to feel the benefits of that.

“We’ve had multiple months now where wages are rising, energy bills have fallen, mortgage rates are down and taxes are being cut… I’m pleased with the progress that we’re making.”

Mr Sunak added: “I am confident the economy is getting healthier every week.”

A recession, which is defined as two consecutive three-month periods where the economy contracts, was declared in February.

It came after the ONS said GDP, a major measure of economic growth, shrank 0.3% between October and December. It followed a contraction of 0.1% in the three months from July to September.

The slump was blamed on reduced consumer spending power amid high inflation and energy bills. Months of wet weather also contributed to keeping shoppers at home, commentators said.

The latest figures also revealed better-than-expected growth for March. GDP was up 0.4% during the month, which was higher than the 0.1% forecast by economists.

GDP growth figures for February were also revised upwards by the ONS, from 0.1% to 0.2%.

While previous recessions have been long-lasting – such as during the global financial crash of 2008 and 2009 – the latest one had been expected to be short-lived.

Recession over with a bang – but will voters forgive government?

Ed Conway

Economics and data editor

@EdConwaySky

Britain is not just out of recession. It is out of recession with a bang.

The economic growth we saw reported this morning by the Office for National Statistics is not just faster than most economists expected, it is the fastest growth we’ve seen since the tail-end of the pandemic when the UK was bouncing back from lockdown.

But, more than that, there are three other facts that the prime minister and chancellor will be gleeful about (and you can expect them to be talking about this number for a long time).

First, it’s not just that the economy is now growing again after two-quarters of contraction (that was the recession).

An economic growth rate of 0.6% is near enough to what economists used to call “trend growth”, back before the crisis – in other words, it’s the kind of number which signifies the economy growing at more or less “normal” rates.

And normality is precisely the thing the government wants us to believe we’ve returned to.

Second, that 0.6% means the UK is, alongside Canada, the fastest-growing economy in the G7 (we’ve yet to hear from Japan, but economists expect its economy to contract in the first quarter).

Third, it’s not just gross domestic product (GDP) that’s up. So too is gross domestic product per head – the number you get when you divide our national income by every person in the country.

Read the full analysis here

Economy ‘returning to full health’

Chancellor Jeremy Hunt described the figures as “encouraging” and said it showed that the economy was “returning to full health”.

He told Sky News: “I think that for families who’ve been having a really tough time, this is an indication that difficult decisions that we’ve taken over recent years are beginning to pay off and we need to stick with them.

“We’re seeing that inflation is falling faster and I think people recognise it’s been a very, very challenging period, but they don’t vote for Conservative governments for us to do popular things.

“They trust us to do the right thing for the long-term benefit of the economy and that is what we’ve been doing.”

However, opposition parties said there was little cause for celebration.

Labour’s shadow chancellor Rachel Reeves said: “This is no time for Conservative ministers to be doing a victory lap and telling the British people that they have never had it so good.

“The economy is still £300 smaller per person than when Rishi Sunak became prime minister.”

Sarah Olney MP, Treasury spokesperson for the Liberal Democrats, added: “This Conservative government crashed the economy and sent mortgages spiralling.

“If Rishi Sunak thinks hard-hit households will be celebrating today, he is even more out of touch than we thought.”

Liz McKeown, the ONS’s director of economic statistics, said: “There was broad-based strength across the service industries with retail, public transport and haulage, and health all performing well.

“Car manufacturers also had a good quarter. These were only a little offset by another weak quarter for construction.

“In the month of March, the economy grew robustly led, again, by services with wholesalers, the health sector and hospitality all doing well.”

Ruth Gregory, from research firm Capital Economics, said the figures suggested the UK’s economic recovery would be stronger than previously anticipated.

She added: “All the early indicators suggest that GDP growth rose robustly in April as well.

“At the margin, this may mean the Bank of England doesn’t need to rush to cut interest rates. But the timing of the first interest rate cut will ultimately be determined by the next inflation and labour market releases.”

The latest figures come after the Bank of England held interest rates at 5.25% on Thursday and issued new forecasts for the UK economy.

The Bank projected that growth would be stronger this year, with unemployment and inflation rates lower than previously expected.