GDP figures: UK economy grew in January – is the recession over already?

The UK economy grew by 0.2% in January, raising hopes that the recession may already be over.

Official figures last month showed the UK entered a technical recession in the final quarter in 2023 but data from the Office for National Statistics released today shows tentative signs of recovery.

The country’s economic output or gross domestic product (GDP) is estimated to have increased by 0.2% in January 2024 after a 0.1% drop in December.

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The UK economy was helped by a 0.2% rise in services output, attributed to a 3.4% jump in retail spending during January.

Construction output grew by 1.1% in January 2024.

“There’s been lots of talk about ‘green shoots’ and an economy that’s turning a corner, and January’s GDP figures delivered growth primarily thanks to a rebound from the retail sector as cash-strapped Brits rushed to take advantage of post-Christmas sales, says Dannie Hewson, head of financial analysis for AJ Bell. 

Is the UK recession over?

It would be premature to start celebrating the end of a recession. 

The ONS data shows the economy is still struggling, with services output in the three months to January 2024 down 0.2% and construction down by 0.9%.

Production output also fell on a monthly basis by 0.2% and by the same amount over three months. 

Meanwhile, in real terms when you adjust for inflation, GDP for January was actually down 0.1%.

“Overall performance is in line with market expectations, so unlikely to cause a major move in markets,” says Nicholas Hyett, investment manager at Wealth Club. 

“But, if the return to growth can be sustained the country should be on course to exit recession in pretty short order – a relief for the government even if the man or woman on the street is unlikely to notice the difference between anaemic growth and mild recession."

The UK economy would need a positive performance over the full quarter to be out of recession and we won’t get those figures until May.

Hewson says  0.2% is hardly a number to get excited about.

“It’s just a continuation of the trend that we’ve seen over the past couple of years. An economy bumping along the bottom, flatlining and stagnating,” she says.

“Psychologically shedding the label of recession is important because it helps foster confidence.” 

She says biggest shot of adrenaline is likely to come once the Bank of England finally delivers the much-anticipated interest rate cut that markets are expecting in the summer.