The UK economy grew by 0.2% in January according to the latest figures from the Office for National Statistics released today.

The new figures, in line with economists’ predictions, were boosted by an improvement in the services and construction sectors.

Lindsay James, investment strategist at Quilter Investors, said the ONS figures suggests that the UK is already on course to be pulled out of its short recession.

The UK economy entered recession with a 0.1% fall in December.

Ms James said: “While the 0.2% uptick represents just one month of data, after a better start to the year for the services and construction sectors, it could represent the start of a slightly more positive period for the UK given some of the challenges facing the economy are beginning to ease.

“Inflation is expected to fall in the coming months, due in part to a lower energy price cap which could help alleviate the pressure on UK households and support the recovery of the consumer-driven economy.

“With this in mind, alongside this morning’s GDP figure, the UK inflation print next week will be closely watched by the Bank of England ahead of its interest rate decision the following day.”

Tom Stevenson, investment director at Fidelity International, said the improving outlook for the UK economy could lead to a positive shift in sentiment towards the UK stock market.

He said: “The UK’s short and shallow recession may already be over. GDP growth in January was, as expected, 0.2%, fuelled by a stronger service sector.

“Despite the return to growth, there was still a modest contraction for the three months from November to January compared to the prior three months. Alongside yesterday’s rise in unemployment and slowing wage growth, this shows that the UK economy is not out of the woods just yet.

“The Bank of England is likely to sit on its hands during the first half of the year as it waits for a clearer picture of where growth and inflation are heading.

“The recovery from the shallow recession during the second half of 2023 does, however, build on the more positive tone from the Office for Budget Responsibility which last week raised its forecasts for growth to 0.8% for 2024 and 1.9% in 2025.”