The UK economy expanded in the first month of the year as gross domestic product (GDP) grew by 0.2%, according to the Office for National Statistics (ONS).
The figure signals that the UK could be at the end of 2023.
Reta heading out of the recession it fell intoil and housebuilding, two sectors that struggled in December, helped lead the rebound in January.
ONS director of economics statistics Liz McKeown said: “The economy picked up in January with strong growth in retail and wholesaling. Construction also performed well with housebuilders having a good month, having been subdued for much of the last year.
“These were partially offset by falls in TV and film production, lawyers and the often-erratic pharmaceutical industry.
“Over the last three months as a whole, the economy contracted slightly.”
The UK economy may have slipped into a technical recession at the end of 2023 according to estimates from think tanks, with the UK government publishing data this week that will show how the economy fared.
Gross domestic product edged down by 0.1% in the final three months of last year, following an equal decline in the previous quarter, according to the National Institute of Economic and Social Research (NIESR).
A technical recession is defined as two consecutive quarters of contracting GDP.
The Office for National Statistics (ONS) will publish the October to December figures on Thursday and experts expect them to show the economy shrank by either 0.1% or 0.2%. In the three months from July to September the economy has already been confirmed to have contracted by 0.1%.
What is a recession?
Usually, when a country’s output is growing, the value of the goods and services it produces – known as its gross domestic product (GDP) – goes up. But during an economic downturn this value falls.
A recession is a period of negative economic growth for two consecutive quarters. It is when GDP drops for two three-month periods in a row, and comes as a sign that the economy is weakening.
Read more: UK wage growth slows but still beats inflation
Will there be a recession in 2024?
There have been concerns over the UK’s weak economic growth for some time, but the country has managed to avoid a recession so far. But most economists are predicting the UK will be declared officially in recession when the ONS figures come out.
Capital Economics is predicting that the gross domestic product (GDP) fell by 0.3% in November and December, which would mean that the economy contracted by 0.1% in the final quarter of last year, as it did in the three months prior.
Sunak added that the cut in national insurance at the start of the year “shows that the plan is working”, but declined to say whether entering a technical recession would affect the possibility of further tax cuts.
Read more: Bank of England official issues warning over interest rate cuts
Bank of England governor Andrew Bailey said on Monday it was not too important whether the economy shrank in the final quarter of last year and entered a shallow ‘technical’ recession.
What does a recession mean for me?
Economic downturns such as recessions generally reduce economic opportunities, meaning failed businesses, fewer jobs, and lower wages.
As a result, UK households might have difficulty paying bills or saving money. This may push many into debt to make necessary payments.
Graduates and school leavers may find it harder to get their first job as companies cut back on hiring and spending.
Bank of England rate-setter Jonathan Haskel has said he wants to see more evidence that inflationary pressures are cooling before he votes for an interest rate cut.
Haskel, one of the two members of the Bank’s monetary policy committee who voted to raise rates last week, told Reuters that it was right to worry about inflation becoming embedded.
“I’m not going to apologise for banging on about persistence because I think we’re right to.”
Interest rates were left at a 16-year high of 5.25% last Thursday, following a rare three-way split. Six rate-setters voted for no change, Haskel and Catherine Mann wanting to increase rates and Swati Dhingra pushed for a cut.
Fellow hawk Mann said on Thursday that her vote was “finely balanced”, but also mentioned risks of “continued inflation momentum and embedded persistence”.
She said UK services inflation, on a three-month annualised basis, was 3.3 percentage points above headline inflation, compared with 1.8 and 0.7 percentage points in the US and euro area respectively.
Mann questioned how quickly goods and services prices in the UK would return to patterns consistent with the 2%. “I am not convinced that the near-term deceleration in headline inflation will continue,” she said.
Read more: How to save money on your council tax as bills set to rise by at least 5%
The BoE now expects headline inflation to hit its 2% target around April or May, about 18 months earlier than it previously thought after gas prices tumbled, before rising towards 3% at the end of 2024 as the impact of falling energy prices fades.
Markets expect at least three interest rate cuts this year, bringing the interest rate down to 4.5% by the end of 2024.
Watch: Bank of England says rates ‘under review’
Households across England face a 5% or more council tax increase in April as local authorities impose inflation-busting bills on residents.
Town halls across the country have started to announce the increase to be applied to council tax in April and many are going with the maximum possible of 4.99%. The Treasury expects around 95% of them to do so.
Councils have the freedom to raise tax by 3% – plus another 2% for social care – without holding a referendum.
Such rises will add around £100 to typical Band D council tax bills, taking them to an average of more than £2,100.
How can I save on my council tax bill?
Single discount
Yahoo Finance UK columnist and head of personal finance at Hargreaves Lansdown, Sarah Coles, said that if you live alone, you can get the single person discount of 25%.
There are also discounts for those with conditions like Alzheimer’s, some full-time carers for people with disabilities on specific benefits, and people on pensions credit. The discount will depend on who lives in the house, so it’s worth checking what you could get on the government website Apply for a Council Tax discount – GOV.UK (www.gov.uk).