In the latter half of 2023, the British economy experienced a recession, presenting significant hurdles for Prime Minister Rishi Sunak, who promised to stimulate growth in anticipation of an upcoming election this year.
Official statistics reveal that Gross Domestic Product (GDP) shrank by 0.3% in the December quarter, a figure worse than anticipated, following a 0.1% contraction in the July-September period. A Reuters survey had suggested a milder decline of 0.1% between October and December.
Investors are anticipating an interest rate cut by the Bank of England this year, while businesses are urging the government to зкщмшву additional aid in budget planning by March 6th.
Jeremy Hunt, Chancellor of the Exchequer, remarked that there are indications of a positive shift in the British economy, emphasizing the need to stick to the plan of reducing taxes on employment and businesses to bolster the economy.
According to the Office for National Statistics, there was a 0.1% growth in the economy in 2023 compared to 2022. The Bank of England predicts a modest rise in output for 2024, projecting an increase of only 0.25%. Despite this, the British economy has remained stagnant for nearly two years, with recessions becoming progressively infrequent as the economy expands and matures.
The onset of the COVID-19 pandemic triggered the most severe contraction in two quarters at the beginning of 2020. Before this global financial crisis, there was a significant recession lasting slightly over a year, stretching from the second quarter of 2008 to the second quarter of 2009.
Wednesday data revealed that inflation in January remained below the anticipated levels of 4.0%, reigniting discussions of a potential rate cut by the Bank of England as soon as June. However, robust wage growth reported on Tuesday underscored the reasons behind the Bank of England's cautious approach.
The decline in GDP during the fourth quarter marked the steepest contraction since the first three months of 2021, coinciding with the introduction of new COVID-19 restrictions in the United Kingdom. Economic output dipped by 0.1% in December compared to a 0.2% increase in November, contrary to the 0.2% contraction predicted in a Reuters poll.
According to the Office for National Statistics, the primary drivers behind the GDP decline in the final quarter of last year were manufacturing, construction, and wholesale trade.
In every quarter of 2023, GDP per capita experienced a decrease, marking the longest continuous decline since early 2022, a trend unseen since 1955.
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