S Poddar
Rachel Reeves, preparing for the next spring statement, is especially worried about the surprise 0.1% UK economic slump in January. The Office for National Statistics (ONS) released the figures, contrary to the 0.1% increase City experts had anticipated for the period.
The dismal performance of the services sector, which could not counter the industrial sector’s slide, was one of the key contributing reasons to this loss. Of particular note was manufacturing output dropping 1.1%, undoing the 0.7% rise that occurred in December of last year. To top it all, poor winter weather conditions prevented home building, adversely affecting the construction sector.
Yael Selfin, the UK chief economist at KPMG, explained the situation saying, “The UK economy begins the year on the back foot as global uncertainty throws a shadow over the outlook.”
The economy had in December previously shown signs of improvement with a 0.4% growth, which helped to add up to a 0.1% growth in the last quarter of the year. This helped save the economy from entering two successive quarters of stagnation.
Even with the latest setback, the Bank of England’s monetary policy committee is likely to keep interest rates at 4.5% when it meets next week. The financial markets have already priced this in.
The National Institute of Economic and Social Research (NIESR) expects 0.4% growth in the first quarter of 2025, which is more optimistic. This forecast beats the more conservative 0.1% growth projection of the Bank of England.
A complex relationship between internal problems and global uncertainty is seen in the condition of the economy at present. In spite of challenges, there remains scope for limited development over the next few months in the industrial and building sectors. As policymakers attempt to implement policies that will enhance stability and economic growth, the spring statement will be closely watched.
