UK expected to avoid recession
Revised forecasts from the Office for Budget Responsibility (OBR) suggest the UK will not enter recession this year despite households facing a record drop in spending power.
Chancellor Jeremy Hunt unveiled the independent fiscal watchdog’s latest projections during his Spring Budget statement delivered to the House of Commons on 15 March. Mr Hunt declared it was a “Budget for Growth” before announcing updated OBR figures which predict that, although the economy will contract this year, it will not now see two consecutive quarters of decline and thereby avoid the technical definition of a recession.
The updated figures suggest the UK economy will shrink by 0.2% over the course of this year – which represents a significant upgrade from last autumn’s forecast of a 1.4% contraction – with growth then expected to hit 1.8% in 2024 and 2.5% in 2025. This improved outlook comes in spite of a sharp fall in real household incomes which the OBR said was “the largest two-year fall in living standards since records began in the 1950s.”
Prior to the Chancellor’s statement, the latest monthly gross domestic product figures published by the Office for National Statistics (ONS) had confirmed that the UK economy is currently performing better than analysts had feared. ONS said the economy expanded by 0.3% in January; this represents a sharp rebound from December’s 0.5% decline and exceeded the consensus forecast in a Reuters poll of economists which had predicted a growth rate of 0.1%.
Survey data released towards the end of last month also suggests the economy is likely to have expanded across the whole of the first quarter. The preliminary headline figure from the S&P Global/CIPS UK Purchasing Managers’ Index came in at 52.2 in March, a second successive monthly reading above the 50 threshold which indicates growth in private sector output.
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