UK economy unexpectedly grows
By Abigail Townsend
Date: Friday 13 Jan 2023
(Sharecast News) - The UK economy unexpectedly grew in November, official data showed on Friday, easing recession fears.
According to the Office for National Statistics, monthly gross domestic product nudged 0.1% higher in November, following growth of 0.5% in October. Analysts had been expecting a 0.2% decline.
In the three months to November, however, GDP fell 0.3%, primarily due to the extra bank holiday in September for the late Queen's state funeral.
The main driver of November's growth was the services sector, which grew 0.2% following an increase of 0.7% in October, which the ONS revised upwards from its earlier estimate for 0.6%. The largest contributions came from administrative and support services activities as well as information and communication.
The FIFA football World Cup, which kicked off on 20 November, also helped, the ONS noted. Output in consumer-facing services growing by 0.4%, with the largest contribution coming from food and beverage services activities.
Production output decreased by 0.2%, following a fall of 0.1% in October, which was revised down from no change, dragged lower by manufacturing, which slid 0.5%.The construction sector was flat following growth of 0.4% a month previously.
Stronger-than-expected November GDP means the UK could now narrowly avoid recession in 2022. There will need to be sharp fall in December, of around 0.5% assuming no further revisions, for fourth quarter growth to be negative. A recession is defined as two consecutive negative quarters of GDP.
Michael Hewson, chief market analyst at CMC Markets UK, said: "With the September decline of -0.8% set to drop out of the rolling three-month numbers when the December [data are] released, the UK might avoid a technical recession, if this week's positive retail updates are any indication. But any growth is likely to be pretty anaemic, and 2023 is still likely to be very challenging."
Alpesh Paleja, lead economist at the CBI, said: "While the economy performed better than expected in November, the data cannot mask the underlining problems in the UK economy. High inflation is severely impacting household budgets and businesses are facing intense cost pressures. As a result, consumer spending and investment plans are weakening."
Danni Hewson, financial analyst at AJ Bell, said: "Celebrating 0.1% growth feels a bit like clutching at straws. The UK economy is still floundering around in the post-pandemic mire, down 0.3% on February 2019 levels. Manufacturing seems stuck in a downward groove, construction flatlined and strike action was beginning to exert its grip on productivity on the rail network and postal and courier services."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "We continue to think that GDP will drop substantially in the first and second quarters. The government has temporarily stopped paying Cost of Living grants to low-income households in the first quarter, and will then reduce substantially its energy price support in the second quarter.
"Meanwhile, the Monetary Policy Committee's rapid rate hikes have dramatically increased the cost of external finance for corporates, who mainly have floating rate loans.
"We continue to look for a 0.5% quarter-on-quarter decline in GDP in the second quarter, and a 0.9% drop in the third."
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