Additional data shows the economy performed better than first measured between January and March, but attention is shifting to supporting the recovery as the clock ticks towards next Thursday’s elections.
Britain’s recovery from recession in the first three months of the year was stronger than initial figures suggested, according to official data.
In an update to its first growth estimate, the Office for National Statistics (ONS) said gross domestic product (GDP) rose by 0.7% between January and March.
It was originally said on May 10th output was 0.6% higher over the previous three months – a positive figure that ended the mild recession that hit in the second half of 2023.
Subsequently, the effects of the Bank of England’s interest rate hikes to combat inflation were widely attributed by economists to stifling demand.
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All of the growth in the January-March period was attributable to the services sector, which accounts for almost 80% of the economy.
We have since learned that it was zero growth The ONS recorded poor weather conditions in April, particularly on construction sites and in shopping streets.
It is the latest data from the ONS before the country goes to the polls on July 4 – with the economy, and particularly personal finance, among the issues high on voters’ agendas following the fallout from the COVID pandemic and the energy-fuelled cost of living crisis.
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The date of the general election coincided with a heated debate over whether the Bank should cut interest rates, which could reduce borrowing costs.
During its last policy meeting just over a week ago, the Tariff Setting Committee voted 7-2 to keep the bank rate at 5.25%.
The minutes of the meeting reveal continuing concerns about the pace of wage growth and persistent inflation in the services sector.
The Bank fears that an interest rate increase at this time could further fuel price increases, as basic wages rise by 6%.
The rate of inflation is currently back at the 2% target for the first time in three years.
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Despite this gap in consumer favor, with wage growth outpacing inflation since June last year, the impact of the crises since 2020 has taken its toll on living standards, campaigners say.
The Resolution Foundation said on Friday that real disposable household income was lower at the start of 2024 than at the end of 2019.
It was said that growth in this parliament so far has been lower than in all but two parliaments since 1910, despite growth of 2.4% last year.
The think tank said that average incomes per person were £120 per year lower in the period since the last election.
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Figures like these go to the heart of the election campaign criticism of the lack of clarity from the main parties about their tax and spending obligations.
But they also provide ammunition to critics of the Bank of England who argue that interest rates should be lowered.
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Thursday’s financial stability report reiterated future pressures as it warned they would still be present three million mortgage holders have yet to feel the pain of higher interest rates on their repayments.
As things stand, financial markets and economists expect the first rate cut to come in August or September, barring new shocks.
For many, the prospect of action in June was largely eradicated by the election; the Bank wanted to avoid any doubt about its independence.