The UK has avoided the prospect of recession after new figures showed the economy unexpectedly grew by 0.1% between October and December.

Figures from the Office for National Statistics beat the forecasts of City economists and the Bank of England who were forecasting a 0.1% decline.

The data will ease pressure on Chancellor Rachel Reeves who has been accused of squeezing growth out of the economy following her £40 biliion of tax increases in the budget.

She said: “For too long, politicians have accepted an economy that has failed working people. I won’t.

“After 14 years of flatlining living standards, we are going further and faster through our Plan for Change to put more money in people’s pockets.

“That is why we are taking on the blockers to get Britain building again, investing in our roads, rail and energy infrastructure, and removing the barriers that get in the way of businesses who want to expand.”

Ben Jones, lead economist at the CBI, said:  “The rebound in activity in December is encouraging. Although growth over Q4 as a whole was still lacklustre, the data supports our view that the loss of momentum in the second half of last year will prove to be a soft patch for the economy rather than a slide back into stagnation.  

“But our recent forecast for a return to moderate growth over 2025 will require consumers to abandon some of their recent caution. And it assumes that businesses won’t see their headroom for investment squeezed any further.  

“Today’s figures underline how important the government’s renewed focus on growth is. Much of the innovation and investment necessary to drive economic growth will come from business leaders across the UK.   

“They want to see a government fired up to move from positive words to ambitious delivery, working with business to create the right environment for investment and expansion.  

“Whether that’s the Industrial Strategy, or reforms to business rates and the Apprenticeship Levy. By prioritising these the government can unlock much needed private sector investment and deliver on its clear vision to kickstart the economy in 2025.” 

US inflation rises

US stocks finished mostly lower on Wednesday after an unexpected acceleration in core inflation spooked markets, causing bond yields to rise strongly.

“Hotter-than-expected inflation has given investors something new to fret about, with the data presenting the Federal Reserve with less of a reason to cut interest rates any time soon,” says Dan Coatsworth, investment analyst at AJ Bell.

The Dow and S&P 500 fell 0.5% and 0.3%, respectively, while the Nasdaq was little changed by the close.