The City basked in the rare glow of “really strong” economic news today as the UK emerged from recession far faster than expected.
The gloom of last year’s economic crisis and cost of living was forgotten as news of the 0.6% rise in first-quarter GDP helped push the FTSE 100 to a new all-time high. It was the fastest growth since the fourth quarter of 2021, when the UK emerged from the pandemic.
The City had only expected quarterly growth of 0.4 percent, but crucially, the strong data did not dampen hopes of a rate cut in June or August at the latest.
Figures from the Office for National Statistics (ONS) show that the recovery from last year’s “technical” recession was led by the services sector, which grew by 0.7 percent. Previously, GDP had fallen by 0.3 percent in the fourth quarter and 0.1 percent in the third quarter, which together met the definition of a recession.
In a note titled “Finally some good news for the UK,” the economics team at Japanese bank Nomura said: “This looks like a really strong number. With some GDP releases, you can point to some volatile factors that determine strength or weakness; however, with this release, it looks like the fundamentally most important factors are all positive.”
Danni Hewson, head of financial analysis at broker AJ Bell, said: “The UK has emerged from what will go down in history as the shortest and mildest recession on record. After months of bobbing around stagnation, 0.6% growth will be a real confidence boost for the UK economy.
“Services and manufacturing have helped cushion the ongoing challenges facing the construction sector, which has been dampened not only by real downpours but also by the Bank of England’s ongoing interest rate pause, which has dampened demand from prospective homeowners, while changing working habits have prompted businesses to rethink their office needs.”
Aster Crawshaw, senior partner at international law firm Addleshaw Goddard. “The latest GDP figures demonstrate the fundamental strength of the UK economy and will provide confidence to those looking to deploy capital and invest in major projects in London and across the country in sectors such as energy, utilities, construction, digital assets, healthcare and retail.”
The better than expected GDP growth caused the FTSE 100 index of leading stocks to rise to a new record. In the morning, the blue chip index was at 8442, an increase of around 60 points.
The positive sentiment was reinforced by an update from property portal Rightmove, which said sales agreed between January and April had increased by almost a fifth, “with both sellers and buyers now increasingly looking to transact.” CEO Johan Svanstrom said: “We continue to expect a better year for the UK property market in 2024 than in 2023.”
