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<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6-820x461.jpeg" alt="" class="wp-image-487683" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107415700-1715834412074-gettyimages-2152345990-cfoto-chinasha240514_np8N6.jpeg 1600w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Foreign trade containers are being stacked at the container yard of Qingdao Port in Qingdao, China, on May 14, 2024.  Nurphoto | Nurphoto | Getty Images</figcaption></figure>



China remains a “critical supplier” to the world and efforts for a full decoupling remain “difficult, if not impossible,” a trade report by Allianz Trade said.



Despite talk of decoupling and derisking from China, European companies remain bullish about prospects in the country — with nearly 40% of companies in Germany and Spain and more than 30% of firms in France expecting their supply chain footprint n the country to increase.



That’s according to the report which showed that only 27% of companies surveyed in the U.S. were planning to expand in China.



“European companies are clearly less worried than U.S. firms,” the report, led by Allianz Trade’s Head of Economic Research Ana Boata said.



The Allianz Trade survey polled more than 3,000 companies in China, France, Germany, Italy, Poland, Spain, the UK and the U.S. were surveyed about their outlook for global trade in 2024.&nbsp;



More than one-third of respondents plan to increase their China footprint, while only 11% said they would decrease it, the trade survey showed.&nbsp;



“China remains the world’s critical supplier, from which a full decoupling seems difficult, if not impossible,” the Allianz Trade report said. 



Meanwhile in China, companies there are growing more optimistic about exporting to other countries.



Over one in ten exporters in China — the second-largest exporter of goods to the U.S. after Mexico —projected a greater than 10% increase in exports.&nbsp;



This is higher than other countries which mostly expected a 2% to 5% increase in exports, data from the report showed.



“Chinese exporters are more optimistic than [other countries] in the survey,” said Francoise Huang, senior economist for Asia Pacific at Allianz Trade.&nbsp;



“Last year was a bad year for overall exports, we had a global trade recession. So that’s why we think respondents in our survey are particularly optimistic,” Huang told CNBC’s “Squawk Box Asia” on Thursday.



<h2 class="wp-block-heading" id="h-diversification-is-inevitable"><a></a>Diversification is inevitable</h2>



Although companies might not completely decouple supply chains from China, diversification is still on the cards.



“Companies that are looking at diversifying their supply chains are looking at the rest of Asia Pacific, with a good focus on ASEAN,” Huang told CNBC, referring to the 10-member Southeast Asian trade bloc.



The report showed that exporters may be more optimistic in 2024 but have also become more concerned about the geopolitical landscape, as well as risks related to shortages of inputs and labor and financing.



About 73% of those surveyed said risks related to politics and protectionism were their top concern. Exporters are still worried about supply chain disruptions, with “31% of respondents placing transport risks among their top three risks and 28% included the risk of input shortages,” the report said.



About 48% of U.S. exporters that manufacture in China or have suppliers there say they would consider countries in Asia-Pacific and Latin America in their diversification efforts.



“Relocating within the same region and nearshoring seem to be the preferred trends,” the report said, adding that only 5% of respondents think reshoring trends will reverse in the next two years, while almost 30% expect it to increase.&nbsp;



The Russia-Ukraine war continues to be the largest geopolitical risk companies expect to hinder supply chains, while trade wars between the U.S. and China is the biggest threat to firms with long supply chains and more than 50% of foreign production.&nbsp;

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China is a ‘critical’ global supplier, full decoupling may be impossible, survey shows

<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107411245-1715050593477-gettyimages-2149526811-INDIA_MODI-820x461.jpeg" alt="" class="wp-image-487616" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107411245-1715050593477-gettyimages-2149526811-INDIA_MODI-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107411245-1715050593477-gettyimages-2149526811-INDIA_MODI-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107411245-1715050593477-gettyimages-2149526811-INDIA_MODI-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107411245-1715050593477-gettyimages-2149526811-INDIA_MODI-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107411245-1715050593477-gettyimages-2149526811-INDIA_MODI-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107411245-1715050593477-gettyimages-2149526811-INDIA_MODI.jpeg 1600w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Narendra Modi, India’s prime minister, center, during a campaign rally in Agra, Uttar Pradesh, India, on Thursday, April 25, 2024. Modi doubled down on his attacks against the main opposition party by using language critics say sows division between the country’s Hindu majority and Muslim minority. Photographer: Prakash Singh/Bloomberg via Getty Images Bloomberg | Bloomberg | Getty Images</figcaption></figure>



A decade into power, India’s Prime Minister Narendra Modi appears set to secure a rare third term, with the general elections now underway.



Under his rule, India’s economic growth has been robust and its geopolitical standing in the world has risen.



Yet, the country has also witnessed signs of democratic backsliding which has become apparent during his leadership, observers and critics say.



“Modi has projected himself in the mould of an East Asia strongman,” Asim Ali, an independent political researcher in New Delhi, told CNBC.



He has also been called “the high priest of India — that he is above all politics,” Ali added. “This is very worrying as mixing religious nationalism with economic development” has been a “central feature” of his government.  



In its latest 2024 report, the Sweden-based V-Dem Institute said a third Modi term could worsen the political situation “given the already substantial democratic decline under Modi’s leadership and the enduring crackdown on minority rights and civil society.”



The U.S. research group Freedom House said Indian elections will be taking place in a media landscape characterized by increasing “legal attacks on critical journalists” and news outlets.



There is no question the “space for democracy between elections has shrunk” under Modi, Milan Vaishnav, South Asia director at the Carnegie Endowment for International Peace, told CNBC.



“Today, the liberal character of India’s democracy is less apparent,” he added, with “rising majoritarianism, weakening checks on executive authority and a growing intolerance for dissent.”



Last year, the government slammed a BBC documentary — which questioned Modi’s alleged role during the 2002 deadly Gujarat riots — and blocked social media platforms from sharing any clips of it.



Many Indian mainstream media, especially the Hindi-speaking outlets, have been “co-opted” to spread propaganda to deliver “the government message,” according to Ali.



India shuts down the internet more than any other country, with authorities frequently using such tactics to stem political protests and suppress criticism, rights groups say.



In a recent Newsweek interview, Modi addressed the issues and called India the “mother of democracy.”



“Our media plays an important role in this regard,” he said, dismissing claims of “diminishing media freedom” in India as “dubious.”



The prime minister’s office and the ruling Bharatiya Janata Party did not respond to CNBC’s request for comment.



<h2 class="wp-block-heading" id="h-opposition-witch-hunt"><a></a>Opposition ‘witch hunt’</h2>



Ahead of the elections, India’s main opposition — the National Congress party — accused the Modi government of freezing its bank accounts.



“This is a criminal action on the Congress party done by the prime minister and the home minister,” said Congress leader Rahul Gandhi in a fiery attack.



“It is being orchestrated to cripple us before the elections,” he claimed, adding the people were being “robbed of their constitution and democratic structure.”



The Modi administration rejected the opposition’s allegations.



Previous governments have also pursued “a witch hunt against opposition politicians,” said Chietigj Bajpaee, a senior research fellow for South Asia at&nbsp;Chatham House.&nbsp; &nbsp;



But the scale of “actions by the Modi government is what makes it more alarming,” since it has “employed key levers of power” to intimidate opponents, he added.



India’s Supreme Court recently granted an interim bail to jailed Delhi chief minister Arvind Kejriwal, a vocal political rival of Modi, who was arrested in March under a bribery case. The arrest raised eyebrows as he was the leader of India’s Aam Aadmi Party, a key player in a larger opposition alliance.



The timing was “unusual” as it came just before the elections, said Bajpaee. It appears the government doesn’t “want to leave any stone unturned” in its stated target of securing 400 seats in the Lok Sabha or lower house of parliament, he added.



<h2 class="wp-block-heading"><a></a>‘Pro-Hindu party’</h2>



In the last decade, Modi’s BJP has become emboldened in pushing its Hindu nationalist ideology, say analysts. The aim was to consolidate its support among the Hindus, who make up 80% of the country’s 1.4 billion population.



“The BJP is an avowedly pro-Hindu party,” said Vaishnav. Since coming to power in 2014, but especially post-2019, it has “sought to use law, regulation, and even civil society to promote its agenda,” he added.



In January, Modi inaugurated a controversial temple in the city of Ayodhya — at the site where an ancient mosque was demolished by a Hindu mob — fulfilling a decades-long campaign promise.



“The temple issue would matter in the Hindi-speaking belt, especially to energize the Hindu base,” said Ali, adding the government has also used “anti-Muslim” rhetoric during the election campaign.



Modi was accused of hate speech recently after he reportedly called Muslims “infiltrators” at a rally, seen as undermining India’s secular constitution.



The Modi government’s “talk of establishing a ‘Hindu Rashtra’ or Hindu nation does indicate ambitions to demolish the divide between state and religion,” noted Bajpaee, warning this could “erode India’s secular credentials.”



<h2 class="wp-block-heading"><a></a>Cult-like status?</h2>



Yet, public backlash against Modi’s hardline rule has been limited. His charisma and persona have made him incredibly popular both at home and abroad.



“There’s no one in the opposition to match that kind of popularity,” said Ronojoy Sen, senior research fellow at the Institute of South Asian Studies, in a recent CNBC interview.



Political watchers argue Modi benefitted from a cult-like status created around him — backed by the ruling party’s formidable election machinery — to build a direct connection between him and voters.



For those unhappy with the country’s direction “to vote out the BJP means they have to get rid of Modi,” said Neelanjan Sircar, a senior fellow at the Centre for Policy Research in New Delhi. That becomes “hard to do if voters identify with him.”



His populist appeal has endured despite India’s entrenched economic problems such as rising youth unemployment and growing wealth inequality.



A<a href="https://www.thehindu.com/elections/lok-sabha/pre-poll-study-2024-method-note/article68051262.ece" target="_blank" rel="noreferrer noopener"> </a>CSDS-Lokniti pre-poll survey showed Modi was way ahead in popularity with 48% of the respondents picking him as their choice for prime minister compared with his opposition rivals.



India’s economic progress was not “obviously, worse before Modi came to the scene,” noted Sircar. “During Manmohan Singh’s time, India was also growing very fast,” he added, referring to the economic reforms under the former prime minister in the 1990s.



“What has changed is the way in which everything is branded in Modi’s image.”



Even the BJP’s manifesto is called “Modi Ki Guarantee” — or Modi’s guarantee, Sircar pointed out, adding that the entire political system “is geared towards positive attribution to the top.”



<h2 class="wp-block-heading"><a></a>‘Big changes’</h2>



With election results due in early June, it has been widely expected the prime minister and the BJP will cruise to victory for a third term, given India’s feeble opposition.



A reelected Modi government will be “more forceful” in pushing ahead with “politically sensitive economic reforms and its more divisive identity-driven agenda,” said Bajpaee, from Chatham House.



In a recent Interview, Modi exuded confidence and said he wanted to make India “the third economic superpower,” outlining his bold vision.



The Indian leader will “flex his muscles” to enact significant legislation on a strengthened mandate, added Carnegie’s Vaishnav.



“Modi has already prepared the electorate to expect ‘big changes’ once they’re brought back to power,” he added.

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Modi’s strongman rule raises questions about India’s ‘democratic decline’ as he seeks a third term

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<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="462" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107414676-1715697984930-gettyimages-2152910133-wallstl424193_qvig1fef-820x462.jpeg" alt="" class="wp-image-487293" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107414676-1715697984930-gettyimages-2152910133-wallstl424193_qvig1fef-820x462.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107414676-1715697984930-gettyimages-2152910133-wallstl424193_qvig1fef-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107414676-1715697984930-gettyimages-2152910133-wallstl424193_qvig1fef-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107414676-1715697984930-gettyimages-2152910133-wallstl424193_qvig1fef-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107414676-1715697984930-gettyimages-2152910133-wallstl424193_qvig1fef.jpeg 929w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Traders work on the floor during morning trading at the New York Stock Exchange on May 14, 2024. Spencer Platt | Getty Images</figcaption></figure>



Traders appear increasingly confident that the U.S. Federal Reserve could start cutting interest rates as early as September, after inflation data cooled more than expected in April.



Some analysts, however, are far from convinced about the prospect of imminent rate reductions.



The consumer price index (CPI), a broad measure of how much goods and services cost at the cash register, increased 0.3% from March, the Labor Department’s Bureau of Labor Statistics reported Wednesday. That was slightly below a Dow Jones estimate of 0.4%.



The softer-than-expected data on Wednesday propelled stocks to fresh record highs and fueled speculation about how soon the Fed could be prepared to begin cutting rates.



Traders are currently pricing in a roughly 70% chance of a U.S. rate cut in September, according to the CME FedWatch Tool. That marks a sharp increase, compared to earlier in the week.



Jerome Schneider, head of short-term portfolio management at PIMCO, said on Thursday that the latest U.S. inflation data confirmed to investors that the potential for a near-term rate hike was now “off the table.”



“I think more contextually, we have to really understand that we have celebrated a lower inflation rate, the market has. But, in context, at PIMCO we’re specifically thinking about the longer-term trajectory of how the Fed is going to react to this data,” Schneider told CNBC’s “Squawk Box Europe.”



“More importantly when you look [at] … what is going on within the segments of CPI and the [Personal Consumption Expenditures Price Index], the more prevalent inflation indicator for the Federal Reserve, it still remains relatively resilient,” Schneider said.



“In fact, to get below a 3% number in those core figures, we’re going to have to see prints over the course of the remainder of the year of 0.2% or lower. Right now, we’re still well above that.”



He added that while the latest inflation data provided some relief, in the context of the Fed quickly getting back closer to its 2% target, “it is probably unlikely at this point in time.”



<h2 class="wp-block-heading" id="h-softer-data"><a></a>Softer data</h2>



Alongside the latest U.S. inflation data, the Commerce Department reported on Wednesday that retail sales were flat on the month, compared with the estimate for a 0.4% increase. The print appeared to show that consumer spending in the world’s largest economy had lost some momentum.



“If you put the inflation data with the retail sales data earlier in the week, where it was a decent miss, and really weakened discretionary areas, and that to me tells us a story about a consumer that under the hood is starting to feel the effects of these higher rates,” Jacob Mitchell, chief investment officer and founder of Antipodes Partners, told CNBC’s “Squawk Box Europe” on Thursday.



“I think probably the market is starting to see softer data coming, which will make the job of the Fed a little bit easier.”



Asked whether the CPI data suggests that the Fed is on course to cut rates in September, Mitchell replied, “Look, I would agree that you didn’t get what you needed on the key components, services and owner’s equivalent rent.”



He added, “And those two elements, look, if we don’t get much weaker goods numbers, then in the second half of the year, you get base effects coming in, so you’re going to see a natural reacceleration in core CPI.”



— CNBC’s Jeff Cox contributed to this report.

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U.S. inflation data fuels bets of Fed rate cuts as early as September — but analysts aren’t convinced

<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="720" height="405" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/IMG_4495.jpeg" alt="" class="wp-image-486984" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/IMG_4495.jpeg 720w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/IMG_4495-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/IMG_4495-160x90.jpeg 160w" sizes="auto, (max-width: 720px) 100vw, 720px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



Inflation eased slightly in April, providing at least a bit of relief for consumers while still holding above levels that would suggest a cut in interest rates is imminent.



The consumer price index, a broad measure of how much goods and services cost at the cash register, increased 0.3% from March, the Labor Department’s Bureau of Labor Services reported Wednesday. That was slightly below the Dow Jones estimate for 0.4%.



On a 12-month basis, however, the CPI increased 3.4%, in line with expectations.,



Excluding food and energy, the key core inflation reading came in at 0.3% monthly and 3.6% on an annual basis, both as forecast.



This is breaking news. Please check back for updates.

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<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107412522-1715225276125-gettyimages-2012746910-jh_coders2_0063-820x461.webp" alt="" class="wp-image-486123" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107412522-1715225276125-gettyimages-2012746910-jh_coders2_0063-820x461.webp 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107412522-1715225276125-gettyimages-2012746910-jh_coders2_0063-300x169.webp 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107412522-1715225276125-gettyimages-2012746910-jh_coders2_0063-160x90.webp 160w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107412522-1715225276125-gettyimages-2012746910-jh_coders2_0063-768x432.webp 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107412522-1715225276125-gettyimages-2012746910-jh_coders2_0063.webp 1200w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">55% of leaders say they’re concered about having enough talent to fill roles in the year ahead as AI skills become more relevant than ever before, new study finds. Pixdeluxe | E+ | Getty Images</figcaption></figure>



Today’s winners are learning how to leverage artificial intelligence to stay competitive and relevant — employees and businesses alike.



“AI is not going to replace you. You’re going to be replaced by someone who uses AI to outperform you,” said Laurence Liew, director for AI Innovation at AI Singapore, during a panel discussion at Salesforce’s World Tour Essentials event in Singapore.



While a lot of professionals (45%) worry AI will replace their job, the majority (55%) of leaders are concerned about a lack of talent to fill roles, according to the 2024 Microsoft Work Trends Index.



There is a dearth of talent, and consequently a huge opportunity for people who can learn AI skills, with as many 71% of corporate leaders saying they’d prefer a less experienced candidate with AI skills over a more experienced one without them, according to the report.



While AI has been the talk of the town ever since the launch of OpenAI’s ChatGPT in November 2022, big companies have been slow to integrate the technology and help upskill their talent pools.



There is a gap in the modern workplace between what appears necessary and what is seemingly feasible.



While 79% of executives believe their company should adopt AI to stay competitive, the pressure to generate immediate returns on investment has slowed AI transition, according to the Microsoft study.



As a result, employees around the world are taking matters into their own hands, learning to use AI tools on their own. While upskilling on AI at home can lead to a competitive edge, it also poses a few problems.



<h2 class="wp-block-heading" id="h-the-risks-of-self-learning-ai">The risks of self-learning AI</h2>



Experts say one of the biggest issues with upskilling on AI at home is that many people don’t know how to do it safely and effectively.



To the naked eye, there are many “free” AI resources online such as ChatGPT and other tools using large language models (LLMs), but experts say these tools aren’t actually free. LLMs are algorithms that can identify, summarize, translate, forecast, and produce information by employing huge datasets.



“There’s nothing free in this world. Your data is the commodity that you are trading,” Liew said. “You should not be using your company data or any of your own personal data [when using free online AI tools].”



Doing so can put sensitive personal or company data at risk. Part of upskilling on AI tools is learning how to do so safely and effectively.



<h2 class="wp-block-heading">The must-have AI skill</h2>



The top skill to learn today is communicating effectively with existing AI-powered LLMs, according to Liew. Open AI’s ChatGPT, Microsoft’s Copilot and Google’s Gemini employ LLMs.



“People use ChatGPT wrongly — because it looks exactly like Google search,” Liew told CNBC Make It.



When working with an LLM, the key is to be specific in your prompts.



“You have to give the AI a lot of context — treat AI like a very hardworking intern that will make mistakes occasionally &#8230; If you think about it, if you’re [asking] an intern to do something, it won’t be one sentence. The intern would probably be scratching their head on what to do,” he said.



The best way to upskill on AI tools at home is to use them, according to Liew. Through practice, you can learn how to feed the LLM more descriptive prompts that will help generate your desired outcome.



“You still need to know [your domain] very well [but] the mundane part of looking through 20 files is now done by the AI system — imagine when you can turn around [work] at that kind of speed — the type of transformation that can happen,” Liew said.



Although AI tools may still seem foreign, by next year, “it will be like knowing how to use your spell-checker in Microsoft Word,” Liew said.

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<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="575" src="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107374281-1708014467967-gettyimages-2005544457-75350394-820x575.jpeg" alt="" class="wp-image-485012" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107374281-1708014467967-gettyimages-2005544457-75350394-820x575.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107374281-1708014467967-gettyimages-2005544457-75350394-300x210.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107374281-1708014467967-gettyimages-2005544457-75350394-128x90.jpeg 128w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107374281-1708014467967-gettyimages-2005544457-75350394-768x539.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107374281-1708014467967-gettyimages-2005544457-75350394-1536x1078.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2024/05/107374281-1708014467967-gettyimages-2005544457-75350394-scaled.jpeg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



The U.K. economy has emerged from recession as gross domestic product rose 0.6% in the first quarter, official figures showed Friday, beating expectations.



Economists polled by Reuters had forecast growth of 0.4% on the previous three months of the year.



The U.K. entered a shallow recession in the second half of 2023, as persistent inflation continued to hurt the economy.



Although there is no official definition of a recession, two straight quarters of negative growth is widely considered a technical recession.



The U.K.’s production sector expanded by 0.8% in the period from January to March, while construction fell by 0.9%. On a monthly basis, the economy grew by 0.4% in March, following 0.2% expansion in February.



In output terms, the services sector — crucial to the U.K. economy — grew for the first time since the first quarter in 2023, the Office for National Statistics said. The 0.7% growth was mainly driven by the transport services industry which saw its highest quarterly growth rate since 2020.



U.K. Prime Minister Rishi Sunak, whose Conservative Party recently suffered significant losses at local elections, welcomed the news. “The economy has turned a corner,” he said in a post on social media platform X.



“We know things are still tough for many people, but the plan is working, and we must stick to it,” Sunak added.



Suren Thiru, economics director at ICAEW, a professional group for chartered accountants, struck a more measured tone. He said the positive impact of weaker inflation could be curtailed by a renewed caution to spend amid political uncertainty ahead of general elections expected later this year.



“The UK’s escape from recession is a rather hollow victory because the big picture remains one of an economy struggling with stagnation, as poor productivity and high economic inactivity limits our growth potential,” said Thiru.



The Bank of England’s Monetary Policy Committee on Thursday warned that indicators of persistent inflation “remain elevated,” and voted to keep its main interest rate at 5.25%.



The central bank forecast headline inflation close to 2% in the near-term, but said it expects an increase slightly later in the year as the effects of a sharp fall in energy prices wear off.

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