The economy narrowly avoided recession in the second half of last year, according to newly published Office for National Statistics (ONS) figures. This is despite growth sharply reducing in December.
The ONS reports that output between October and December was flat at 0 per cent.
Had the figure been negative, the UK would have met the technical definition of a recession because the economy would have contracted over two consecutive quarters. GDP was previously reported to have fallen by 0.3 per cent between July and September.
Among the factors which helped the UK dodge rescission was a surge from travel agents, which increased by 14.8 per cent in the last three months of the year, following a fall in the previous quarter. There was also modest growth in the construction industry of 0.3 per cent.
Jeremy Hunt said in response to the ONS figures: “The fact the UK was the fastest growing economy in the G7 last year, as well as avoiding a recession, shows our economy is more resilient than many feared.
“However, we are not out the woods yet, particularly when it comes to inflation.
“If we stick to our plan to halve inflation this year, we can be confident of having amongst the best prospects for growth of anywhere in Europe”.
Output in December fell by 0.5 per cent compared to the previous month, the has ONS said, with contributions to the decline also coming from some early winter snow disruption and strikes including the Royal Mail dispute. The report also pointed to a negative impact of the World Cup, because of the lack of premier league football, as another explanation for decreased output.
ONS director of economic statistics, Darren Morgan, said of the performance: “The economy contracted sharply in December meaning, overall, there was no growth in the economy over the last three months of 2022.
“In December public services were hit by fewer operations and GP visits, partly due to the impact of strikes, as well as notably lower school attendance.
“Meanwhile, the break in Premier League football for the World Cup and postal strikes also caused a slowdown.
“However, these falls were partially offset by a strong month for lawyers, growth in car sales and the cold snap increasing energy generation. Across 2022 as a whole, the economy grew 4%”.
“Despite recent squeezes in household incomes, restaurants, bars and travel agents had a strong year. Meanwhile, health and education also began to recover from the effects of the pandemic”.
Economists have suggested that a recession in the first part of this year is inevitable, with the International Monterey Fund (IMF) predicting last month that the UK would be the worst performer in the developed world, and the only to experience negative growth, including sanctions-hit Russia.
The Bank of England even predicted in November last year that the economy was already likely in recession.
Shadow chancellor Rachel Reeves has said the new figures are evidence that the UK economy is stuck in the “slow lane”. She called for “urgent measures” to be brought forward to alleviate the cost-of-living crisis after Office for National Statistics data showed the UK recorded zero growth between October and December
She said: “Today’s figures show us how – despite Britain’s great potential – our economy is stuck in the slow lane.
“We can be a leader in the industries of the future that will help grow our economy.
“And we must bring in urgent measures to prevent yet more harm from the cost of living crisis, using a proper windfall tax on oil and gas giants to stop the energy price cap going up in April so that people have more money in their pockets.
“Built on the rock of economic stability, Labour will tackle the cost of living crisis and get our economy growing, with our Green Prosperity Plan, reform to business rates, and by making the UK the best place to start and grow a business”.
Jonathan Moyes, head of investment research at Wealth Club, said the ONS data “paints a very subdued picture for the state of the economy in Q4”. He said:
“The release will do little to sway the opinions of economic forecasters. It remains a brave call to signal a turning point in sentiment for the UK. However, there does appear to be a more optimistic consensus forming.
“The Bank of England upgraded its outlook for the economy last week, energy prices are falling sharply, China is reopening, and interest rate expectations have eased significantly”.
