- UK GDP fell 0.1% in January following a 0.4% surge in December
- A slowdown in manufacturing and construction contributed to the contraction
- The service sector was boosted by strong food sales, though people choosing to eat at home suggests brittle consumer confidence
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK GDP figures:
“Remember that iconic Carlsberg beer campaign? Well, the chancellor might just wish she could bring a bit of that magic to January’s GDP figures.
“As surprises go it’s a pretty unwelcome one, but when you’re talking about an economy bouncing along the bottom, the big picture doesn’t really change that much. The UK is struggling to find the key to the growth that the government says is a priority if people are going to start to feel better about their own financial lives.
“And when you drill into the one main positive from the month, that people had spent more on their weekly food shop, it could be seen as households choosing to batten down the hatches and stay at home rather than spend money out because they’re nervous about the road ahead.
“It’s understandable that they’re nervous when you consider the trade wars which have wrought such havoc on global stock markets this week and seem to have contributed to the decline in manufacturing, with car makers in particular slowing production.
“The auto sector is facing something of a perfect storm, with confusion about EV policies, continued range anxiety from motorists and less cash to splash on shiny new cars, along with nerves about Donald Trump’s trade policies.
“Talk of a potential US recession is also damaging to global confidence, and in the UK that confidence has already been hammered by an increase to employer national insurance which changed business conversations and is still yet to come into play. If the Bank of England’s number crunchers got their forecasts right then the UK is expected to grow by half as much this year as had been thought back in November, and that will have backed Rachel Reeves into a corner.
“The government didn’t want to hold a proper ‘fiscal event’ until next autumn, but with the increase in spending on defence, the ratcheting up of trade tensions and a brittle economy, the Spring Statement is now expected to hold more than just a forecast.”
