England falls into recession ahead of national election

London
CNN
—

The United Kingdom slipped away Depression Months ahead of a general election, official figures on Thursday derailed Prime Minister Rishi Sunak's pledge to generate economic growth.

Gross domestic product fell 0.3% in the final three months of 2023, the Office for National Statistics said, following a 0.1% contraction in the July to September period. said. A recession is usually defined as two consecutive quarters of contraction.

“All major sectors fell in the quarter, with manufacturing, construction and wholesale the biggest drag on growth, partially offset by increases in hotels and vehicle and machinery hire,” ONS director of economic statistics Liz McKeown said in a statement.

The ONS estimates that UK GDP will grow by just 0.1% in 2023. This is the worst performance If we extrapolate from 2009 when the economy was still reeling from the global financial crisis, the pandemic hit 2020. A weak rise in output last year was followed by 4.3% growth in 2022.

“Overall the economy is broadly flat through 2023,” McKeown said.

The news will come as a disappointment to Chung, whose ruling Conservative Party is contesting two local elections in England on Thursday. It could extend the leadership already enjoyed by the opposition Labor Party Earlier in the survey National election Expected this year.

“While the shallowness of this recession is comforting, these figures confirm that our economy is locked in a cycle of persistent stagnation until 2023,” said Suren Thiru, economic director of the Institute of Chartered Accountants in England and Wales.

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The data also provides an unfavorable backdrop to the government's annual budget announcement due next month. UK Finance Minister Jeremy Hunt Despite the anemic economy and skyrocketing, it is widely expected to release modest cuts in some taxes Government debt levels.

Hunt said on Thursday that he expected lower growth due to higher interest rates, which have taken the Bank of England to a 26-year low. To deal with inflation.

“But there are signs that the British economy is turning a corner…even if it's still tough for many families, we need to stick to the plan – cut taxes on work and business to build a stronger economy,” Hunt said. Added to a statement.

Despite the mild recession, the UK economy is doing much better than many economists feared a year ago, with many predicting a significantly sharper decline.

“The decline in economic activity in the second half of 2023 is too dramatic to label as a recession, as employment continues to rise, real wages rebound and levels of business and consumer confidence return to levels consistent with rising activity by the end of the year,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics. .

Slowly Rising inflation and expected cuts in interest rates later this year could boost economic activity, which is already picking up in the dominant services sector.

UK annual inflation was unchanged 4% in January. That's still double the Bank of England's 2% target, but well short of the record 11.1% in October 2022.

Food inflation eased to 7% in March 2023 from a recent high of 19.2%, the ONS said on Wednesday. Food prices recorded their first decline in more than two years from the previous month.

Meanwhile, salaries have now grown rapidly Price for seven consecutive months. According to the ONS, average wages excluding bonuses grew at an annual rate of 6.2% in the three months to December.

“We think this is the end of the UK recession and growth will stumble into positive territory, but only slowly,” economists at Nomura wrote in a note on Thursday.

The notion that recovery will be disincentive is separately supported Information From the ONS Thursday, productivity growth, measured as output per hour, was flat last year.

This story has been updated with additional details.