(March 13): The UK economy rebounded in January, registering modest growth after falling into a technical recession in the second half of last year.

Gross domestic product rose 0.2% following a 0.1% decline in December, the Office for National Statistics (ONS) said on Wednesday. Services and construction delivered the gains, offsetting a drop in industrial production.

The figures leave Britain on track to grow over the first quarter as a whole, bringing the recession to an end. That’s a boost for Prime Minister Rishi Sunak, who is seeking to defy opinion polls that suggest his Conservative Party is facing a heavy defeat at a general election expected later this year.

However, the recovery is likely to modest as past interest-rate increases continue to feed through to households and companies. Analysts expect the UK to trail every other Group of Seven country except Germany for another year.

With the labour market cooling and data next week expected to show a sharp slowdown in inflation, investors are betting the Bank of England will begin cutting rates in August from their highest level in 16 years. Markets are now pricing in four quarter-point reductions over the next year.

Growth in January was boosted by strong retail sales as a two percentage point cut in national insurance, a payroll tax, took effect and lifted disposable incomes.

Households, which already are enjoying the return of real wage growth, can expect a further lift in April after Chancellor of the Exchequer Jeremy Hunt announced a further two-point cut in National Insurance Contributions in his budget last week. Workers on the minimum wage will also get an uplift of almost 10%.

Weighing on growth in January was strike action by junior doctors, which contributed to the highest number of days lost to industrial action since September.