YEREVAN (CoinChapter.com) — The UK and Japan fell into recession late last year. This is mainly due to the negative impact on the economy due to lower consumer spending.
This downturn in both major economies stands in stark contrast to the strong performance of the U.S. economy. In the fourth quarter of 2023, the U.S. economy grew at an annual rate of 3.3%, exceeding economists’ expectations of 2%.
UK plunges into recession ahead of election
Recent statistics show the UK has slipped into a shallow recession, dealing a major blow to British Prime Minister Rishi Sunak.
According to data released by the Office for National Statistics (ONS), gross domestic product (GDP) in the fourth quarter fell 0.3%, a larger decline than expected. This not only exceeded economists’ forecasts of a 0.1% decline, but also followed the 0.1% decline reported in the previous quarter.
Economists typically define a technical recession as two consecutive quarters of economic contraction. The relatively mild decline in the UK suggests that the UK economy is closer to a recession scenario than a full-blown recession.
Nonetheless, these developments could increase pressure on the Bank of England to consider interest rate cuts. The apex bank has kept interest rates at 5.25%, the highest in 16 years.
As news broke that Britain was in recession, the pound weakened against the dollar.
The ONS’ latest figures stand in stark contrast to Chancellor Sunak’s assurances of economic growth. Data shows the UK suffered a recession during his first year in office. GDP in the fourth quarter decreased by 0.2% compared to the same period last year. Moreover, the overall growth rate in 2023 is only 0.1%.
Before heading to 10 Downing Street, Sunak also served as Chancellor of the Exchequer. The current figures are a major blow to his party ahead of general elections later this year.
Japan is no longer the third largest economy
Meanwhile, Japan also reported an economic contraction, casting a shadow over the financial health of the Asian giant amid the recession.
Gross domestic product (GDP) shrank at an annual rate of 0.4% in the fourth quarter of 2023, according to Cabinet Office data.
This decline follows a 3.3% annualized dio in the previous quarter. Japan’s economic performance fell short of economists’ expectations, who had forecast quarterly growth of 1.4%.
The recession caused Japan to lose its position as the world’s third-largest economy. With a GDP of $4.2 trillion, it currently lags behind the United States, China, and Germany.
The Japanese yen has also continued to decline against the U.S. dollar, making it the worst performer among major currencies.