The growth of British economic activity in the first quarter was revised slightly upwards on Friday, welcome news for Conservative Prime Minister Rishi Sunak a few days before elections which promise to be lost for his party.
The United Kingdom’s gross domestic product (GDP) grew by 0.7% between January and March, “up from an initial estimate of 0.6%”, announced the Office for National Statistics (ONS). ).
These data confirm that the country emerged in the first quarter from the recession into which it fell at the end of 2023, and saw its economic activity pick up again more quickly than expected.
UK GDP shrank by 0.3% in the fourth quarter of 2023, after falling by 0.1% in the third. Two quarters of economic contraction in a row are generally considered by economists to be a recession.
The upward revision of first quarter growth is a surprise. It is particularly due to the services sector, while economists generally expected the first estimate to be maintained.
This is “the fastest growth in the G7” for the first quarter, Mr Sunak said on Friday on X (ex-Twitter), assuring that his party, distanced in the polls ahead of the general elections on July 4, has “a clear plan to offer a more secure future” to British families.
“My number one priority is the creation of wealth to improve the situation in the country,” reacted his Labor opponent Keir Starmer on the same social network, affirming that only his party could “bring the stability that the (British) economy needs “.
“Whoever is elected prime minister next week could benefit from a slightly stronger economic recovery than we had forecast,” said Paul Dales, an analyst at Capital Economics.
“Consumer spending will be the main driver” of growth this year and next, the economist added. But “it could also contribute to the Bank of England cutting interest rates a little more slowly than it would otherwise have done,” he warned.
– Uncertainties –
In its fight against price increases that have soared in recent years, the Bank of England last week kept its key interest rate at its highest level since 2008, despite inflation slowing to 2% year-on-year in May. A high key interest rate means that British individuals and businesses are seeing a surge in borrowing costs, particularly for property.
The recovery, however, remains uncertain: “the more recent GDP data for April shows that the British economy could have slowed again at the start of the second quarter”, tempered Kathleen Brooks, analyst at XTB.
GDP stagnated in April – in line with forecasts – due to unusually wet weather which penalized the construction sectors and retail sales, the ONS announced in early June.
And the Flash PMI published last week by S&P Global, a leading indicator of growth, showed that private sector activity slowed in June in the country, reflecting in particular the uncertainties in the business world in the run-up to the elections. .
“Until (the next government’s) budget clearly spells out its tax and spending plans, businesses are unlikely to invest on a large scale, further delaying any significant acceleration in GDP growth “, says Lindsay James, at Quilter Investors.
