A sudden contraction of the British economy in January for this reason

Contrary to all expectations, the British economy shrinkled 0.1% in January, with pressure from a significant decrease in industrial product by 1.1% compared to December 2024, according to the data of the National Statistics Office in the United Kingdom on Friday, knowing that economists had expected in a Reuters poll a monthly growth of 0.1%.

Although the January contraction erases only a part of 0.4% growth in December, this reading represents a disappointment for Finance Minister Rachel Reeves, whose first mission is to maintain steady growth of the economy. During three months until January, the British economy grew 0.2%, with a little less than the average expert expectations of a 0.3%growth survey.

In a report on the new data, the American Bloomberg Network considered that the unexpected contraction at the beginning of 2025 would increase pressure on the government of Prime Minister Kiir Starmer due to the weak momentum since the Labor Party returned to the authority last summer, noting that the contraction in this percentage means that the result is still a little higher than it was when the Labor Party achieved a landslide victory in the July elections last.

Reeves referred to the troubled global background that led to this weakness, warning that “the world has changed, and we feel the consequences of this all over the world,” noting that the Minister of Finance is under pressure to start fulfilling her promise to enhance growth after a series of weak economic indicators during the Labor Party era, and she is preparing to announce what is expected to be a shocking economic update on March 26, where it may be reduced, where it may be reduced, where it may be reduced, where it may be reduced, where it may be reduced Official growth forecast. The figures issued today, Friday, indicate that the economy has shrunk in four months out of seven months since the Labor Party took office, as the GDP increased only 0.3% from what it was in June.

The British pound also continued its losses, as it decreased 0.2% to $ 1.2924, as traders gradually increased their expectations for more interest rate discounts, and they now expect 57 basis points this year.

The weakness recorded in January is partly due to the UK being exposed to the strongest storm in ten years, indicating that some sectors may flourish last February. While economists expect steady growth this year, the risks are increasing at expectations with the escalation of the trade war led by Donald Trump, which led to the collapse of stocks and stirring fears of a global slowdown, according to Bloomberg, while the hope will remain in support of Britain’s plans to spend on the infrastructure.

In this regard, the American network is transferred from the economic expert at the National Institute for Economic and Social Research, Haley, if it was saying that “after the weak performance in the second half of 2024, growth is still fragile due to the state of global and local uncertainty”, while it is necessary for the next spring statement to provide stability instead of increasing the state of internal uncertainty.

The Labor Party has previously revealed a set of policies to help it fulfill its promise to enhance growth, including lifting obstacles to construction projects and granting the green light to controversial developments. However, the growth was intermittent in the second half of last year, and morale indicators decreased sharply after a budget for tax burdened in October.

The National Statistics Office stated that production decreased in eight out of 13 industrial sectors in January, where the production of minerals and medicines witnessed the largest decrease, noting that the transmitted evidence indicates that the construction sector was affected by storms, rain and snow during the month. Oil and gas production also decreased. This decrease partially met with 0.1% growth in the services sector, which is the largest sector in the British economy that is slowed down. The retail stores recorded a strong performance in January, thanks to the increase in people’s eating at home, according to the National Statistics Office.

The Central Bank of England expects that the British economy will continue at a slow pace, expecting 0.7% growth in 2025, after a rise of 0.9% last year. In light of unconfirmed expectations, it is expected that the interest rates in the Bank of England will keep interest rates without changing next Thursday, and they warn the markets of only gradual discounts. Officials balance the need to support a stagnant economy, indicators of continuous inflationary pressure and the increased uncertainty. They pointed to the risk of customs duties and the effect of increasing the Labor Party for employers ’salaries on the labor market and prices.