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UK economy shrinks and enters recession by end of 2023

The British economy fell into recession late last year, ending a year of economic tension that saw interest rates pushed to their highest level in 15 years in an effort to curb high inflation.

The National Bureau of Statistics said on Thursday that gross domestic product shrank 0.3% from October to December from the previous quarter, when the economy contracted 0.1%. Weak retail sales, declines in restaurants and other food services, declines in housing and construction are all weighing on the UK economy, the statistics agency said.

British Prime Minister Rishi Sunak last year pledged economic growth He wants voters to judge him on one of five promises. Instead, the economy fell into recession. (Two consecutive quarters of economic decline are generally considered a recession, but other factors such as recession depth and job losses are also important considerations.) Overall, the economy will grow by just 0.1 percent in 2023 compared with 2022.

While Thursday’s data is likely to be revised as more information on the economy is gathered, it paints a picture of the UK’s just like the eurozoneMuch of the past year has been spent with little or no growth. By some measures, this weak data can be viewed with optimism. European economies, including the UK, have proven more resilient than expected, avoiding warnings of a deeper recession in early 2023.

The sluggish economy continues to prove challenging for families and families. Businesses face relatively high costs and rising loan repayments. This is in stark contrast to the United States, where economic growth is soaring. Economies Diving on Both Sides of the Atlantic Because they are trying to make the latest bout of high inflation a thing of the past.

Thursday’s GDP report is the last of three key economic data releases on the UK economy this week.On Tuesday, the Office for Statistics re-launched official estimates of the unemployment rate and other labor market indicators After a four-month hiatus due to difficulties collecting dataThe report shows that the labor market is tighter than previously thought, with the unemployment rate at the end of last year at 3.8% and wage growth of about 6%.

Separate data on Wednesday showed inflation held at 4% in January, unchanged from the previous month but close to its lowest level in two years. Higher caps on household energy bills offset the impact of food inflation and slower prices for furniture and other household items.

Despite stubborn inflation last month, the UK slowed faster than the Bank of England expected. Investors are betting interest rates will fall by mid-year given weak economic growth.

Central Bank Governor Andrew Bailey has said he doesn’t want to keep interest rates high, but policymakers are also wary of prematurely signaling that inflation has been beaten. Wage growth slowed further.

Inflation is expected to continue returning to the central bank’s 2% target, which will be a bumpy road.The challenge was illustrated on Tuesday In the U.S., inflation cooled less than economists expected Traders quickly reduced bets on how soon a rate cut would come.

This year is expected to be another low-growth year for the UK. The ruling Conservatives plan to announce more tax cuts next month as part of a strategy to stimulate economic growth ahead of this year’s election.

But many economists believe Britain does not need tax cuts to stimulate the economy.they call Investment in public infrastructure and servicesincluding schools and health services, and reforms to the planning system to drive a green transition and build more homes.

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