Why it matters: Little or no economic growth.
British Prime Minister Rishi Sunak last year pledged to grow the economy as one of five promises he wanted voters to judge him on. Instead, the economy entered a recession. (Two consecutive quarters of economic decline are generally considered a recession, although other factors such as the depth of the decline and job losses are also important considerations.) Overall, the economy grew just 0.1 percent in 2023 compared to 2022.
While Thursday's data may be revised as more information on the economy is gathered, it paints a picture that Britain, like the eurozone, has experienced little or no growth for most of the past year. By some measures, this weak data can be viewed optimistically. European economies, including Britain, have proven more resilient than expected, averting more serious recession warnings from early 2023.
The subdued economy has continued to prove challenging for households and businesses struggling with relatively high costs and rising loan repayments. And it stands in contrast to the United States, where economic growth has soared, with economies on either side of the Atlantic diverging as they try to put the recent period of high inflation firmly in the past.
Other economic data: Inflation remained stuck at 4 percent in January.
Thursday's GDP report was the latest in a trio of key economic data on the UK economy published this week. On Tuesday, the national statistics office reintroduced official estimates for unemployment and other labor market measures after a four-month hiatus due to difficulties in collecting data. It showed that the labor market was tighter than previously thought, with an unemployment rate of 3.8 percent at the end of last year. Wage growth was about 6 percent.
On Wednesday, separate data showed inflation remained at 4 percent in January, the same as the month before but near the lowest in two years. An increase in the limit on household energy bills offset a slowdown in food inflation and the price of furniture and other household goods.
Key question: When will interest rates fall?
Despite the stubbornness of inflation last month, it slowed faster in Britain than the Bank of England expected. And given weak economic growth, investors are betting that interest rates will fall in the spring.
Andrew Bailey, the central bank governor, has said he does not want to keep interest rates high for longer than necessary, but policymakers are also cautious about prematurely suggesting that inflation has been defeated. In particular, the central bank expects wage growth to slow further.
It is expected that it will be a somewhat bumpy road to sustainably return inflation to the central bank's target of 2 percent. The challenge was illustrated in the United States on Tuesday when inflation cooled less than economists expected and traders quickly scaled back bets on how soon interest rate cuts would come.
What's next: An election year.
This year is expected to be another year of low growth in Britain. The ruling Conservative Party plans to announce more tax cuts next month as part of a strategy to boost economic growth ahead of elections this year.
But many economists argue that Britain does not need tax cuts to stimulate the economy. They call for investment in public infrastructure and services, including schools and healthcare, and for reforms to the planning system to promote the green transition and build more homes.