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UK Economy enters ‘technical recession’ but …. ─ ONS, Finance Minister

British Prime Minister Rishi Sunak

*Finance Minister Jeremy Hunt, however, insists the United Kingdom economy is on the mend, ‘even if inflation stands at 4.0 percent, double the Bank of England’s target rate

Isola Moses | ConsumerConnect

The United Kingdom (UK) economy has receded into recession, according to official data released Thursday, February 15, 2024.

ConsumerConnect learnt the country’s latest economic data appeared to have dealt another blow to embattled British Prime Minister Rishi Sunak.

The PM’s Conservative party is forecast to lose a General Election expected this year.

The latest data also revealed the UK Gross Domestic Product shrank 0.3 percent in the fourth quarter of 2023 after contracting 0.1 percent in the prior three months, the Office for National Statistics (ONS) said in a statement.

The development reportedly places the economy in recession, which is defined as two quarters of falling GDP in a row.

While economists predicted that the recession could be short-lived, the data is a big setback for Sunak, who has placed economic growth as a key priority, agency report also stated.

It comes as the Conservatives badly trail the main opposition Labour party in polls.

Ahead of the General Election, voters take part in two by-elections Thursday, with the Conservatives fearful of losing one-time strongholds in Wellingborough, central England, and Kingswood in the southwest.

Capital Economics analyst Ruth Gregory said: “The news that the UK slipped into technical recession in 2023, will be a blow for the prime minister on a day when he faces the prospect of losing two by-elections.

“But this recession is as mild as they come and timely indicators suggest it is already nearing an end.”

In a broad-based decline, all main sectors shrank in the fourth quarter — with manufacturing and construction among the biggest drags.

The economy was broadly flat last year with 0.1-percent expansion, down sharply from growth of 4.6-percent growth in 2022, the ONS added.

The news came on the same day it emerged that Japan has also entered recession.

“All told, it was a disappointing set of (British) GDP figures, but there’s no reason to panic just yet,” said Henry Cook, senior economist at MUFG Bank.

“For a start, the labour market remains firm with the unemployment rate stands… close to its historical low.

“Consumer confidence has also gradually improved over the last 18 months. That doesn’t scream ‘crisis’ to our minds.”

Finance Minister Jeremy Hunt, in a statement however, insisted the economy was on the mend, even if inflation stands at 4.0 percent, double the Bank of England’s target rate.

“High inflation is the single biggest barrier to growth,” Hunt said following the GDP data.

“Although times are still tough for many families, we must stick to the plan — cutting taxes on work and business to build a stronger economy,” Hunt said.

Chancellor of the Exchequer Hunt is widely expected to cut taxes in his budget next month, in a move seen as a way of closing the gap on Labour.

But with the Bank of England’s main interest rate sitting at a 16-year high of 5.25, millions of voters are suffering from soaring mortgage repayments.

Is PM Sunak pledge ‘in tatters’?

Commenting on Thursday’s data, Labour slammed the government’s stewardship of the economy.

“This is Rishi Sunak’s recession and the news will be deeply worrying for families and business across Britain,” said Labour’s finance spokeswoman Rachel Reeves, adding that his vow to deliver growth was in “tatters”.

While UK inflation has tumbled since striking a 41-year peak of 11.1 percent in October 2022, energy and food prices remain elevated.

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