By Suban Abdulla and David Milliken
LONDON (Reuters) -Britain’s economy grew by the most in nearly in three years in the first quarter of 2024, ending the shallow recession it entered in the second half of last year and delivering a boost to Prime Minister Rishi Sunak ahead of an election.
The Office for National Statistics said gross domestic product expanded by 0.6% in the three months to March, the strongest growth since the fourth quarter of 2021 when it rose by 1.5%.
The first-quarter growth exceeded all forecasts in a Reuters poll of 39 economists which had pointed to a 0.4% expansion of gross domestic product in the January-to-March period, after GDP shrank by 0.3% in the final quarter of 2023.
Friday’s data was welcomed by Sunak who said the economy had “turned a corner”, although the opposition Labour Party, which has a large lead in opinion polls, accused Sunak and finance minister Jeremy Hunt of being out of touch.
“There is no doubt it has been a difficult few years, but today’s growth figures are proof that the economy is returning to full health for the first time since the pandemic,” Hunt said.
But the opposition Labour Party rejected those claims.
“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,” said Labour’s Rachel Reeves, who hopes to succeed Hunt as finance minister.
The Bank of England, which held interest rates at a 16-year high on Thursday, forecast quarterly growth of 0.4% for the first quarter of this year and a smaller 0.2% rise for the second quarter.
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Sterling strengthened against the U.S. dollar after Friday’s ONS figures were released.
TURNING A CORNER?
On a monthly basis, the economy grew by 0.4% in March, faster than the 0.1% growth forecast by economists in a Reuters poll, reflecting strength in retail, public transport, haulage and health – partly due to fewer public-sector strikes.
Car manufacturing also performed well, offset by continued weakness in construction, the ONS said.
Friday’s data also showed that GDP in March was 0.7% higher than a year earlier, and above all economists’ expectations of a 0.3% rise.
However, Britain has still had one of the slowest recoveries from the effects of the coronavirus pandemic.
At the end of the first quarter of 2024, the country’s economy was just 1.7% bigger than its level in late 2019, before the pandemic, with only Germany among the G7 faring worse.
“Despite the better near-term outlook, the improvement in GDP growth looks likely to be constrained by the ongoing weakness in productivity growth as well as reduced scope to increase employment levels,” Yael Selfin, chief economist at KPMG UK, said.
GDP per head rose for the first time in two years in the first quarter, up 0.4%, but was 0.7% lower than a year earlier, highlighting the ongoing squeeze on living standards and Britain’s struggle to boost productivity.
“In per capita terms, it could be said that UK households have seen little meaningful improvement in living standards in the last two years,” Gora Suri, economist at PwC, said.
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