Recession-hit Britain swings to economic growth in January, helped by construction bounce

LONDON — U.K. gross domestic product grew 0.2% in January, the Office for National Statistics said Wednesday, as construction output jumped more than expected.

The headline figure was in line with the forecast from economists polled by Reuters.

It follows a 0.1% contraction in December, while the U.K. economy entered a shallow recession in the second half of last year.

Construction output rebounded from contraction to grow 1.1% in January, the ONS said, but fell 0.9% over a three-month period. The U.K.'s dominant services sector recorded a 0.2% rise in January, providing the biggest contribution to growth, as production output fell 0.2%.

Despite recording monthly growth, GDP was estimated to have shrunk 0.3% compared with a year ago in January, and fallen 0.1% over the three months to January 2024.

Jack Meaning, chief U.K. economist at Barclays, described the figures as "not a hugely positive picture, but it's ahead of where we were at the end of last year."

"Industrial and manufacturing have been weak for the last few prints, you'd expect some bounce-back from that in the end," Meaning told CNBC's "Squawk Box Europe" Wednesday.

"This is good to see, but we'll have to see it on a more prolonged basis to know that it is something sustained."

The latest figures are consistent with a forecast for a "gradual recovery in activity" in the coming months, said James Smith, developed markets economist at ING.

"We think the decline in overall fourth quarter GDP, which marked the second consecutive quarter of negative growth and therefore a technical recession, is unlikely to be repeated in the first quarter of 2024," Smith said in a note.

The British pound was slightly lower against the U.S. dollar and the euro following the release.