Surprise lack of growth in January as service sector stagnated, with falls in recruitment activity

The lack of growth in January suggests that Rachel Reeves’s autumn budget has not given the economy a brisk pick-me-up.

There had also been hopes for a ‘stability dividend’ after the chancellor’s news-lite spring forecast thi smonth, this seems unlikely too – with the Iran war now threatening the economy.

“GDP growth strengthened moderately in the three months to January when compared to the previous three months, led by improving services output, released from the uncertainty that accompanied the 2025 Autumn Budget. However, the outlook has darkened with the hoped for “stability dividend” from a low-key Spring Statement unlikely to materialise. Furthermore, the economy is vulnerable to a growth downgrade for this year because of the war in the Middle East and the resulting spike in energy costs.

“We had previously assumed that economic conditions would improve in the second half of this year but the prospect of higher energy bills, a renewed rise in inflation and a pause in monetary policy easing are likely to hit business and consumer activity. A key risk is that households, fearful of a prolonged spike in energy costs, raise their precautionary saving.

“Zero growth in January highlights just how little momentum the economy had coming into the energy crisis. That makes it more likely that growth will dip sharply below 1% this year, even if there is a swift resolution to the crisis.

“Stagnation in January would make us worried about growth this year, even without the energy price shock that will start to show up in the March data. Indeed, the big improvement in survey data at the start of the year doesn’t seem to have carried over into stronger activity. Improved retail sales were offset by a sharp drop in hospitality activity, suggesting consumers are still cautious.

Surprise lack of growth in January as service sector stagnated, with falls in recruitment activity

The lack of growth in January suggests that Rachel Reeves’s autumn budget has not given the economy a brisk pick-me-up.

There had also been hopes for a ‘stability dividend’ after the chancellor’s news-lite spring forecast thi smonth, this seems unlikely too – with the Iran war now threatening the economy.

“GDP growth strengthened moderately in the three months to January when compared to the previous three months, led by improving services output, released from the uncertainty that accompanied the 2025 Autumn Budget. However, the outlook has darkened with the hoped for “stability dividend” from a low-key Spring Statement unlikely to materialise. Furthermore, the economy is vulnerable to a growth downgrade for this year because of the war in the Middle East and the resulting spike in energy costs.

“We had previously assumed that economic conditions would improve in the second half of this year but the prospect of higher energy bills, a renewed rise in inflation and a pause in monetary policy easing are likely to hit business and consumer activity. A key risk is that households, fearful of a prolonged spike in energy costs, raise their precautionary saving.

“Zero growth in January highlights just how little momentum the economy had coming into the energy crisis. That makes it more likely that growth will dip sharply below 1% this year, even if there is a swift resolution to the crisis.

“Stagnation in January would make us worried about growth this year, even without the energy price shock that will start to show up in the March data. Indeed, the big improvement in survey data at the start of the year doesn’t seem to have carried over into stronger activity. Improved retail sales were offset by a sharp drop in hospitality activity, suggesting consumers are still cautious.

Surprise lack of growth in January as service sector stagnated, with falls in recruitment activity

The lack of growth in January suggests that Rachel Reeves’s autumn budget has not given the economy a brisk pick-me-up.

There had also been hopes for a ‘stability dividend’ after the chancellor’s news-lite spring forecast thi smonth, this seems unlikely too – with the Iran war now threatening the economy.

“GDP growth strengthened moderately in the three months to January when compared to the previous three months, led by improving services output, released from the uncertainty that accompanied the 2025 Autumn Budget. However, the outlook has darkened with the hoped for “stability dividend” from a low-key Spring Statement unlikely to materialise. Furthermore, the economy is vulnerable to a growth downgrade for this year because of the war in the Middle East and the resulting spike in energy costs.

“We had previously assumed that economic conditions would improve in the second half of this year but the prospect of higher energy bills, a renewed rise in inflation and a pause in monetary policy easing are likely to hit business and consumer activity. A key risk is that households, fearful of a prolonged spike in energy costs, raise their precautionary saving.

“Zero growth in January highlights just how little momentum the economy had coming into the energy crisis. That makes it more likely that growth will dip sharply below 1% this year, even if there is a swift resolution to the crisis.

“Stagnation in January would make us worried about growth this year, even without the energy price shock that will start to show up in the March data. Indeed, the big improvement in survey data at the start of the year doesn’t seem to have carried over into stronger activity. Improved retail sales were offset by a sharp drop in hospitality activity, suggesting consumers are still cautious.