UK economy grew 0.3% in November but remains on the brink of recession

GDP fell by 0.2% over the three months to November.

Related topics:  Finance News,  GDP
Rozi Jones | Editor, Financial Reporter
12th January 2024
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"Even a slight downward turn would result in the UK entering a technical recession after Q3 GDP was revised down to a fall of 0.1% at the end of last year."
- Richard Carter, head of fixed interest research at Quilter Cheviot

Monthly GDP grew by 0.3% in November 2023, following a fall of 0.3% in October, the latest ONS statistics show.

However, GDP is estimated to have fallen by 0.2% over the three months to November, compared with the three months to August.

Services output grew by 0.4% in November and was the main contributor to the monthly growth in GDP. Production output grew by 0.3% following a fall of 1.3% in October, while the construction sector fell by a further 0.2% after a fall of 0.4% in October.

Ian Stewart, chief economist at Deloitte, said: “UK activity tends to bounce around from month to month, but the trend through last year was flat. The UK may well have fallen into a recession in the second half of last year, albeit one so mild it hardly warrants the term.

“With past rate rises feeding into mortgage payments and a cooling labour market, growth is likely to flatline in the early part of 2024. We expect to see a return to growth in the second half of the year as lower inflation boosts spending power.”

Richard Carter, head of fixed interest research at Quilter Cheviot, commented: “The UK economy grew by a modestly positive 0.3% month-on-month in November, up from the unexpected 0.3% contraction seen in October. This uplift in November is just enough to bring the UK economy back to flat growth over these two months, but it leaves an awful lot of pressure on the December figures as even a slight downward turn would result in the UK entering a technical recession after Q3 GDP was revised down to a fall of 0.1% at the end of last year.

“This morning’s figure shows just how precarious the situation is for the UK economy and piles yet more pressure onto the Bank of England to cut interest rates. The Bank has managed not to tip the UK into a recession to date, but it is looking increasingly likely that its luck may be coming to an end.

“Growth, though positive in November, is still relatively weak and interest rates are clearly biting. While you might argue the recent drop in inflation leaves the Bank with a considerably less daunting task in terms of steering inflation back to its 2% target this year, there are global headwinds and we saw inflation notch up in the US. Whether the Bank gives in and starts cutting rates sooner than it might have originally liked remains to be seen.

“Economic conditions are incredibly tough, and the UK faces a real challenge when it comes to avoiding recession as we move further into the winter months. The UK is currently on the cusp, and continued weak growth or even contraction cannot be ruled out.”

Derrick Dunne, CEO of YOU Asset Management, added: “The UK continues to send ambivalent signals with its economic performance as the latest figures demonstrate. Short-term rises in GDP are outweighed by flat or falling quarterly movements and revisions.

“The UK’s mixed economic performance is reflective of an economy that is taking knocks easily, but one that is also benefiting from seasonal demand shifts. The upcoming Q4 figures will be heavily reliant on good news from retail and hospitality. But by some accounts it has been a disappointing period for the high street, so it is perhaps not worth holding our breath for.

“This wavering by the economy is likely a good signal for the Bank of England that rates are high enough for now. With employment looking softer and inflation continuing a downward path, it is likely that the wait-and-see approach will persist from rate setters in the months ahead, unless there is a real upside surprise in price rises."

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