The economy expanded faster than anticipated in January, aided by increased school enrollment and the resumption of Premier League football following the World Cup.
Official figures showed the economy expanded by 0.3%, recuperating from a sharp decline in December.
The prime minister said “confidence is returning” with the economy “better than people had anticipated”.
The data is released before next Wednesday’s Budget, in which the chancellor will outline the government’s development plans.
The most recent economic data, according to Prime Minister Rishi Sunak, demonstrated that the government’s “plan is working, that it is the correct one, and that we must adhere to it.”
The economy shrank by 0.5% in December before expanding in January. However, the ONS data also revealed that the economy slowed between November and January compared to the previous three months.
Rachel Reeves, the shadow chancellor for Labour, stated. “Today’s results reveal our economy is still inching along this Tory path of managed decline.”
Tina McKenzie, policy chair at the Federation of Small Businesses, stated, “While January’s figures are a glimmer of optimism, the flat growth over the previous three months means we’re not out of the woods yet, with many small businesses still facing challenging trading conditions.”
Darren Morgan from the Office for National Statistics (ONS), which collects and publishes the data, attributed January’s growth to “the return of children to classrooms, following unusually high absences in the run-up to Christmas, the return of Premier League clubs to a full schedule following the conclusion of the World Cup, and a strong month for private health providers.
“Postal services also partially recovered from the consequences of December’s strikes.”
Given several issues in December, such as postal and transit strikes, economists said the recovery in January was not surprising.
Due to a rise in winter flu, COVID-19, and Strep A. Which can cause scarlet fever, school absences increased in December.
The return of more children to school boosts the economy by increasing education sector output. The ONS reported that the education sector expanded by 2.5% in January after falling by 2.6% the month before.
Activity in the arts, entertainment, and recreation also increased, primarily due to the resumption of Premier League football.
However, January data revealed a decline in output in both the manufacturing and construction industries.
Under the surface, the numbers indicate that the economy is in a weakened position than it initially appears,” said Ruth Gregory, deputy chief UK economist at Capital Economics.
She added that strike action in February may have hindered development and that portions of the economy have yet to feel the effects of successive interest rate hikes.
Last month, ambulance personnel, teachers, nurses, and some in the rail industry walked out.
Ms. Gregory stated, “Therefore, we are skeptical that January’s growth will continue, and we believe that there will still be a recession.”
Other economists, like Goldman Sachs, were optimistic, expecting a UK recession.
A recession is typically defined as two consecutive three-month periods in which the economy contracts.
The United Kingdom reported flat growth between October and December, and Goldman now anticipates neutral growth in the first quarter of this year.
These numbers are better than anticipated, but the economy has not grown over the past three months, and this is expected to continue between January and March.
To date, consumers have demonstrated greater resilience in the face of rising energy prices and interest rates.
The Budget forecasts for next week will be built on an optimistic baseline due to energy price declines.
The economy is stagnant, with tax hikes and higher interest rates to come.
The UK continues to battle with high inflation, raising living costs.
Despite a recent decline in wholesale gas costs, inflation is still at its highest level in nearly four decades.
The Bank of England has raised interest rates to 4% – the highest since 2008 – in an attempt to quell inflation. While this has benefited some consumers, it has increased the pressure on a great number of mortgage holders.
