UK ECONOMY RETURNS TO MODEST GROWTH AT START OF 2024

The British economy showed signs of recovery in January after experiencing a shallow recession in the latter half of 2023, providing some relief for Prime Minister Rishi Sunak ahead of an anticipated election later this year, according to official data.
Gross domestic product (GDP) expanded by 0.2% month-on-month in January, driven by a resurgence in retail sales and house-building activities, following a slight contraction of 0.1% in December.
Liz McKeown, a director at the Office for National Statistics, noted that the uptick in economic activity was particularly evident in the retail and construction sectors. House-building, in particular, experienced a notable improvement after a period of subdued performance. Despite this positive development, it remains uncertain whether the economy has fully emerged from recession. The economy contracted by 0.3% in the final quarter of 2023 and 0.1% in the preceding quarter, meeting the technical definition of a recession commonly used in Europe. Britain's economic recovery has been hampered by various factors, including a surge in energy costs due to Russia's invasion of Ukraine and elevated interest rates set by the Bank of England. However, with inflation easing to 4% in January from higher levels seen in the previous year, and with forecasts indicating a return to the central bank's 2% target, the pressure on household finances is beginning to alleviate. Consequently, the Bank of England is contemplating the timing of potential interest rate cuts.
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