Is the UK recession over? Latest UK GDP stats show growth uptick in January: investment experts warn against complacency

by | Mar 13, 2024

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We’re sensing a slight whiff of positive sentiment in the air this morning, following the news from the ONS of the latest UK GDP statistics, which show that that UK has grown by 0.2% in January.

Of course, this comes after the two consecutive quarters of negative growth at the back end of 2023 and a technical recession for the UK.

But clearly analysts, economists and investment experts aren’t exactly getting carried away quite yet.

They have been sharing their reaction to the latest GDP growth data with us as follows:

Commenting on the latest GDP data, Abhi Chatterjee, Chief Investment Strategist at Dynamic Planner said:

“UK GDP recorded a positive print of 0.2% in January 2024, following a fall of 0.1% in December. That may seem like the economy is turning a corner, but in real terms, GDP has fallen 0.1% in the three months to January. Delving into the quarterly figures, services flatlined, while production and construction fell 0.2% and 0.9% respectively.  Much as the UK would like to congratulate itself, the growth prospects for the economy seem distinctly lacklustre.

“As we get into the election year, policies will need to be revisited and ideas tested – all with a view to encouraging growth through investment, both public and private, in skills and infrastructure, rather than short term views of rate and tax cuts. While election years are often characterised by short-termism, our leaders have to realise that growth and innovation are the only insurance that we have against irrelevance, and innovation happens over time through long term investment. As Keynes once said, it would be foolish not to contemplate the possibility of far greater progress still.”


According to Tom Stevenson, Investment Director, Fidelity International, the UK’s short and shallow recession may already be over, but he’s warning that the UK economy is not out of the woods just yet commenting:

“The UK’s short and shallow recession may already be over. GDP growth in January was, as expected, 0.2%, fuelled by a stronger service sector.

“Despite the return to growth, there was still a modest contraction for the three months from November to January compared to the prior three months. Alongside yesterday’s rise in unemployment and slowing wage growth, this shows that the UK economy is not out of the woods just yet.


“The Bank of England is likely to sit on its hands during the first half of the year as it waits for a clearer picture of where growth and inflation are heading.

“The recovery from the shallow recession during the second half of 2023 does, however, build on the more positive tone from the Office for Budget Responsibility which last week raised its forecasts for growth to 0.8% for 2024 and 1.9% in 2025.

“The improving outlook for the UK economy is likely to lead to a positive shift in sentiment towards the UK stock market which has fallen behind international peers during the sharp recovery from last autumn’s low point.


“The underperformance of British shares has led to a historically wide valuation gap compared with markets such as the US, Japan, and India, all of which are trading at or close to record highs. Both the FTSE 100 and FTSE 250 are valued at around 11 times expected earnings compared with more than 20 for the S&P 500.”

Commenting on the data, Tomasz Wieladek, chief European economist at T. Rowe Price said: “UK GDP rose by 0.2% in January, with a broad-based improvement across manufacturing, construction, and services. In particular, surveys suggest services should accelerate further going forward. The nature of the improvement and the positive services outlook suggest the GDP recovery will be sustainable. Therefore, the UK economy seems to be past the worst and is now coming out of recession.

“The strong fiscal stimulus provided by the government in November and March will likely keep the economy on this expansionary path. The cuts to national insurance will have a high multiplier on consumption and there will also likely be a labour supply response. Overall, differences in the stance of fiscal policy this year mean the UK economy may grow faster than the euro area.

Danni Hewson, AJ Bell head of financial analysis, said:

“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. However, we won’t know officially until May whether that means the recession the country dipped into at the end of last year is already in the rear-view mirror.

“But being serious, 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.

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

“It’s that optimism which pushed the FTSE 100 up to a nine-month high yesterday and is being mirrored over on the other side of the Atlantic despite concerns about sticky inflation.

“Households and businesses are hurting after 14 hikes pushed rates up to a 15-year high, with the latest update on mortgage arrears showing a spike of 50%.

“Confidence is crucial. It gets builders building, makers making and sellers selling. And those green shoots are visible, they just need a bit of fair weather to bed in.”

Lindsay James, investment strategist at Quilter Investors:

“Figures from the Office for National Statistics this morning show the UK rebounded in January with monthly GDP estimated to have risen 0.2% in January 2024 following a fall of 0.1% in December 2023, though on a three-month basis it declined 0.1% compared with the three months to October 2023. This return to growth suggests the UK is already on course to soon be pulled out of the short and shallow recession it entered in the second half of 2023.

“While the 0.2% uptick represents just one month of data, after a better start to the year for the services and construction sectors, it could represent the start of a slightly more positive period for the UK given some of the challenges facing the economy are beginning to ease. Inflation is expected to fall in the coming months, due in part to a lower energy price cap which could help alleviate the pressure on UK households and support the recovery of the consumer-driven economy. With this in mind, alongside this morning’s GDP figure, the UK inflation print next week will be closely watched by the Bank of England ahead of its interest rate decision the following day.

“For now, economic conditions remain relatively tough and GDP in January was still 0.3% lower than the same month a year ago. The recent budget highlighted the tightrope that the government must walk in balancing the growing needs of departments with the desire to lower taxes, leaving little scope for fiscal stimulus. This therefore leaves the Bank of England under pressure to soon play its part in driving economic growth by cutting interest rates. This slight uptick in monthly GDP does little to reduce that pressure, but we can expect it to stand firm for a while longer yet.”

Jeremy Batstone-Carr, European Strategist, Raymond James Investment Services sees it as the UK economy bouncing back after the shallowest technical recession as he comments:

“This morning’s GDP data from the ONS shows that the UK economy grew by 0.2% during January, reversing December’s contraction which saw the country enter into a shallow technical recession. This economic revival has been brought by a rebound in retail sales, and forward-looking indicators confirm that the economy will continue to brighten in the months to come. 

“The retail sector’s bounce back has proved sufficient to offset stagnation in other parts of the economy, notably industrial production and manufacturing output. The retail sector has also counteracted strikes by junior doctors and rail workers which dampened activity in the transport and healthcare sectors. 

“More encouragingly, the Bank of England’s cautious forecast for growth of 0.1% over Q1 of 2024 is on track to be exceeded. Nonetheless, continuing evidence of inflationary pressures will likely dissuade interest rate setters from cutting borrowing costs just yet.  

“Even more encouragingly, in last week’s Budget, Chancellor Jeremy Hunt added to expectations that UK growth outlook should improve in the coming months, with a package of expansionary measures amounting to 0.5% of GDP potentially providing an additional boost to overall demand. On balance, so long as activity maintains its momentum, conditions indicate an improving outlook for the rest of 2024.” 

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