Britain’s economy flatlined in January, according to official figures that dash hopes of a post-election revival.
The economy contracted in November and stagnated in January, which offset a small boost in activity in December, the Office for National Statistics said. In the three months to January growth was zero, weaker than economists’ forecasts of 0.1 per cent.
It was the third month in a row that the three-month measure of GDP was zero, the weakest such run since the middle of 2009, when Britain was reeling from the global financial crisis.
The latest figures do not capture the economic damage caused by the coronavirus outbreak in February and March. Economists said that the outlook had deteriorated significantly, with many analysts cutting forecasts. Pantheon Macroeconomics said the economy would grow by 0.1 per cent in the first quarter of the year, down from a previous estimate of 0.3 per cent.
However, analysts cautioned that “any forecast of the UK economy at the moment is essentially a shot in the dark” as there was no knowing just how bad the coronavirus outbreak could be.
Hours before the ONS release the Bank of England slashed interest rates from 0.75 per cent to 0.25 per cent.
“The support to demand from lower oil prices, as well as the fiscal and monetary stimulus today, should be felt by households and firms in the second half of this year, limiting the chance of a recession taking hold,” Samuel Tombs, an economist at Pantheon, said.
Economists said that the January figures were weak enough to suggest that the Bank of England would probably have had to cut interest rates regardless of Covid-19.
The official figures contradict business surveys indicating that economic activity rebounded at the start of this year. The ONS said manufacturing output rose by 0.2 per cent in January, while construction stagnated by 0.8 per cent. Services, which are about 80 per cent of the economy, eked out growth of just 0.1 per cent in January, down from 0.3 per cent in December.
“Growth in construction, driven by housebuilding, offset yet another decline in manufacturing, particularly the drinks, cars and machinery industries,” the ONS said.
“The dominant service sector also showed no growth in the latest three months with falls in retail and telecoms balanced by strength in rentals, employment and education.”
