- The UK economy grew 0.2% in the three months to January but showed no growth over the month
- Construction sector continued to show weakness with another contraction in housebuilding, although there was some growth in January
- Much of the positive boost came from the recovery of car manufacturing after last year’s JLR cyber-attack
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK GDP figures:
“When looking at economic data it is understood that we’re looking back at what has happened, but that data normally gives us significant insight into what is to come.
“Whilst the latest UK GDP figures do continue to shed light on the weakness of the country’s economy, with construction particularly impacted despite the government’s big push to get Britain building, it can’t provide much clarity on what’s next.
“The war in Iran has completely changed the playing field and the playbook Rachel Reeves has been working from might need ripping up. Interest rates are no longer expected to keep falling, and instead borrowing costs may be set to increase as households once again have to deal with rising prices.
“An already weak housebuilding sector, which had shown signs of recovery in January, might have to rethink its plans for the year if fewer people feel confident in making a big move as mortgage costs edge up.
“If the UK economy was at a standstill in January, what will happen to it in the months ahead? If the oil price keeps climbing and we see spiralling fuel and energy costs, it could require the government to step in once again, even as the cost of its own borrowing edges up.
“The brightest spot in the latest ONS figures is from the recovery in manufacturing as JLR continued to bounce back from last autumn’s cyber-attack. But whilst the service sector managed to eke out some growth in the three months to January, the start of the year pointed to a still cautious consumer and highlighted the weakness in the labour market.
“Recruitment businesses have already reported falling profits as sluggish hiring dented their outlook for the year ahead, and the hospitality sector has been vocal in the challenges it’s faced as people continue to think hard about discretionary spend.
“Whilst many may temporarily find they’ve got a bit more in their pockets from next month, worries about the year ahead are likely to keep spending subdued. That’s going to have a knock-on to businesses trying to mitigate their own concerns.
“It’s ironic that fertiliser is one of the commodities caught in the shipping snarl up in the Strait of Hormuz, because those green shoots we’d all been hoping for this spring seem to be lacking the right fuel to grow.”
