Positive Growth in 2024Q1 Delivers an Encouraging Momentum

Main Points

• Monthly GDP grew by 0.4 per cent in March, following a revised 0.2 per cent growth in February. This monthly figure was mainly driven by increasing output in services sectors, particularly transportation and storage sector.
• GDP grew by 0.6 per cent in the first quarter of 2024 relative to the previous three-month period, a stronger-than-expected growth compared to our forecast last month. This was generated mainly by a widespread increase in services output.
• The fact that the UK’s GDP growth transitioned into positive territory after experiencing the shallow recession in the second half of 2023 is encouraging. However, as shown in figure 1 below, the UK economy has largely flatlined following the initial stages of post-pandemic recovery. To escape the low-growth trend into a new and sustained era of high output growth requires structural changes and public investment.
• We expect that monthly GDP will continue its momentum in April, growing by 0.1 per cent relative to March, driven by growth mainly in services and production, particularly Agriculture. Indeed, the S&P Global/CIPS UK services PMI reported an optimistic balance of 55.0 in April up from 53.1 in March. In line with this positive sentiment, we now forecast GDP to grow by 0.6 per cent in the second quarter of 2024, mainly driven by services sectors.

"Today’s data suggest that monthly GDP grew by 0.4 per cent in March following an upwards revision of 0.2 per cent in February and 0.6 per cent in the first quarter of 2024. The latest data taken together, shows that the UK economy has exited the shallow technical recession experienced late last year. While this economic recovery is welcome, to escape the UK’s low long-term trend rate of growth remains a focal issue amidst an election year."

Hailey Low, Associate Economist