The UK economy remains in a “mixed'' situation.
According to the Statistics Korea, economic growth in the first three months of this year was led by the service sector, which expanded for the first time in a year. Transportation services, legal services, and scientific research all grew steadily, but services including hotels and restaurants declined slightly, and the construction sector contracted significantly.
GDP per capita increased by 0.4% in the first quarter, marking the seventh consecutive quarterly decline.
Still, Britain's economic indicators are “incredibly mixed,” said Tera Arras, head of research and economics at McKinsey's UK and Ireland office and a former civil servant economist. While some sectors, such as professional services and technology, are doing well, others, such as hospitality, are struggling, he said.
The economic picture for consumers is “even more uncertain,” Alas added. Sentiment is negative and, depending on how you measure it, retail sales are also down. However, consumer spending remains a key aspect of the country's economic resilience. Inflation-adjusted household spending rose 0.2% after two consecutive quarters of decline, according to the Statistics Korea.
Part of this can be explained by the labor market. Despite interest rates at 16-year highs, weak investment and rising corporate bankruptcies, the unemployment rate was 4.2% in February, just down from its recent low of 3.8%. Rose.
The medium-term outlook is weak.
The National Institute of Economic and Social Research predicted on Thursday that Friday's economic data will show a recession “in the rearview mirror,” but warned that the long-term outlook for the economy remains weak. Economists at the institute predict growth of about 1% annually over the medium term.
The Bank of England said it expected growth to be 0.5% this year, saying the impact of rising interest rates and curbs on public spending would weigh on the economy. While policymakers say a cut is coming, they plan to take a cautious approach, suggesting rates will fall slowly.
The economy is in the spotlight ahead of the general election.
“It's been a difficult few years, no doubt, but today's growth rates demonstrate that the economy is returning to full health for the first time since the pandemic,” Treasurer Jeremy Hunt said in a statement on Friday. Stated. .
General elections will be held within the next eight months, and the economy is one of the top priorities, with both major political parties pledging to boost growth. Rachel Reeves, from the opposition Labor Party, accused the ruling Conservative Party of “gaslighting” the British people about improving the economy.
In a speech this week, Reeves said many people were struggling to pay their bills, high rents and mortgages, and claims that the UK economy had turned a corner “doesn't speak to the economic reality. ” he said.
The benefits of recovery have not been felt uniformly.
For many households, 2024 will feel like we are emerging from a protracted cost of living crisis. Prices are still higher than before the pandemic and are expected to remain that way, but consumer budgets have eased somewhat. Average incomes are growing faster than inflation, household utility bills are falling, and the government has cut some taxes. The National Institute of Economic and Social Research announced this week that on average, the standard of living, as measured by household disposable income, will be 6% higher this year than last year.
However, the benefits are not shared by everyone. According to the institute, living standards will fall further as households on the lowest incomes struggle to cope with soaring rents.
