Strikes, cost-of-living pressures, and damp weather hampered economic growth in the first three months of the year in the United Kingdom.
The economy grew by only 0.1% from January to March, according to the data, and it remains below levels seen before the Covid pandemic.
The United Kingdom lags behind the growth of other main economies.
The Bank of England stated on Thursday that it was more optimistic about the future and that the United Kingdom would avoid a recession.
The comments were made after the Bank of Canada raised interest rates to 4.5 percent from 4.2 percent as part of its ongoing effort to curb rising prices.
The ONS reported that while the economy grew marginally in the first three months of 2023, it contracted by 0.3% in March due to a decline in auto sales and the retail sector.
The economy is 0.5% smaller than pre-pandemic levels, according to the ONS.
In the first three months of the year, the United Kingdom outperformed Germany, but many other main economies grew faster.
Victoria Scholar, head of investment at Interactive Investor, stated, “Relentlessly high inflation, negative real wage growth, and general cost of living pressures are weighing on the consumer, and consequently the services sector, which is typically a key growth engine for the UK economy.”
“Today’s numbers highlight the importance of taming inflation, a daunting task for the Bank of England and the government, to spark a services revival,”
Darren Morgan, director of economic statistics at the ONS, stated that while IT and construction contributed to growth in the first quarter of the year, this was partially negated by the impact of strikes in the health, education, and public administration sectors.
Mr. Morgan also stated that car sales were “relatively weak” in March, while rainy weather discouraged people from visiting the High Street, which negatively impacted retail sales.
“We also observed a decline in food store sales, and retailers informed us that the rising cost of living and food prices continue to impact consumer spending,” he added.
The economy grew by 0.1% during the first quarter of this year but by the smallest conceivable margin. The decline in March, the most recent month, is cause for concern due to the reversal in the service sector and disappointing auto sales.
Strikes and weather are factors, but the lethargic pattern that has persisted for the past year as energy prices have risen cannot be denied. It is of little solace that Germany is not expanding at all. Quarterly, the British economy has not yet recovered all of the ground lost since the pandemic and Brexit.
The current second quarter may also experience a decline due to the additional holiday. However, analysts anticipate that growth will resume its ascent in the second half of the year.
In the aftermath of an enormous energy shock and other crises, the absence of a recession exceeds expectations. According to yesterday’s statement by the Bank of England, two-thirds of the impact of rate increases to date has yet to reach households.
While the engine of economic growth is running, the United Kingdom will have to wait a little longer for takeoff.
In response to the most recent growth figures, Chancellor Jeremy Hunt stated, “It’s good news that the economy is growing, but to meet the government’s growth objective, we must remain focused on competitive taxes, labor supply, and productivity.”
Rachel Reeves, shadow chancellor, stated, “Despite our country’s enormous potential and promise, today is another entry in the Conservative government’s dismal record of low growth.”
The economic contraction observed in March, according to KPMG economist Yael Selfin, “underscores its fragility despite a decline in wholesale energy prices, improving supply chain conditions, and a recovery in consumer confidence from multi-year lows.”
While a recession is probably no longer on the horizon, higher borrowing costs and tighter credit will likely impair business and household activity this year.