UK economy makes weak start to 2023 as inflation weighs
By David Milliken and Andy Bruce
LONDON (Reuters) -Britain's economy made a lacklustre start to 2023 as inflation ate into households' disposable income, official figures showed on Friday, and economists expect higher interest rates to keep up the pain even as inflation eases.
Friday's figures showed no change to the Office for National Statistics' (ONS) initial estimate of 0.1% quarterly gross domestic product (GDP) growth for the first three months of 2023, leaving output 0.5% lower than it was in the final quarter of 2019, before the COVID-19 pandemic.
Households dug into their savings — although the overall savings ratio remained higher than before the pandemic — and the cost of living increased faster than incomes.
The squeeze on households looks set to continue, as the Bank of England raised interest rates to a 15-yeara high of 5% in June and investors see little sign that it is about to end its tightening cycle, as inflation has stayed higher than expected.
«The final Q1 2023 GDP data confirms that the economy steered clear of a recession at the start of 2023. But with around 60% of the drag from higher interest rates yet to be felt, we still think the economy will tip into one in the second half of this year,» Ashley Webb, UK economist at consultancy Capital Economics, said.
Britain's economic recovery since the COVID-19 pandemic has been much slower than almost every other big advanced economy, though Germany has struggled too and its economy in the first quarter was 0.5% smaller than before the pandemic.
In annual terms, the Britain's economy had grown just 0.2% by the end of the first quarter.
INFLATION SQUEEZE
British households have been put under pressure by a surge in inflation, which hit a 41-year high of
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