boost for pubs and bars during the World Cup helped the UK economy growth of 0.1 percent in November, a better-than-expected performance that has raised hopes that Britain will not slide into recession in 2022.
The official GDP figures provided by the Bureau of National Statistics On Friday morning, it beat analysts’ expectations, who had predicted a 0.3 percent drop.
With inflation expected to fall in the coming months and pressure on energy bills to ease, helped by warmer-than-expected winter weather and a drop in gas prices, the economic outlook is no brighter.
Adding to growing optimism, Tesco and Marks & Spencer both recorded stellar Christmas trade numbers on Thursday, suggesting the UK economy could be more resilient than predicted in the face of the cost-of-living crisis.
A recession is defined as two consecutive quarters or more of falling output. While GDP fell 0.3 percent between July and September, economists widely expected a similar decline in the last quarter of 2022 — despite a 0.5 percent rise in October.
But ONS director of economic statistics Darren Morgan told BBC Radio 4’s Today program that for the UK to slip into recession in the fourth quarter of 2022, GDP would have to contract by 0.6% in December.
He said growth in November was driven by an increase in telecommunications and computer programming, as well as improving activity for employment agencies.
But the hospitality industry, which has been so badly hit by Covid lockdowns and strikes, also saw a welcome lift during the World Cup in Qatar as fans flock to pubs and bars to watch matches.
Mr Morgan said: “What I’d also like to mention is pubs and bars, part of the economy that’s actually been through some really tough times, and they did well in November. And they tell us that they have benefited from the start of the World Cup as it seems many of us were hopeful when it started in November and went out to enjoy the games.”
The Bank of England predicted in November that the UK would officially enter recession when GDP figures are released in December next month and then remain in recession into 2023.
But while Friday’s numbers are a slowdown from October’s 0.5 percent growth, that was largely due to comparisons with September’s 0.6 percent slump — partly caused by the holiday for Queen Elizabeth II’s state funeral. .
In the three months of July to September, the economy contracted by 0.3 percent, according to the ONS. But again, those numbers reflect the negative economic effects of September’s one-time holiday.
Despite unexpected overall growth in November, the ONS said manufacturing output contracted again as strikes hit the transportation and postal sectors.
And economists warned that while Britain could narrowly avoid a recession in 2022, the UK could still face a slowdown in 2023.
Ruth Gregory Senior UK Economist at Capital Economics said: “The small 0.1% increase in real GDP in November suggests that the economy was not as weak in the fourth quarter as we previously thought.
“But even if the economy does slightly better than expected in the fourth quarter, it is stagnant at best. And it is still too early to conclude that the economy will come through this period of high interest rates and high inflation largely unscathed. We still think a recession is coming in the first half of 2023.”
Yael Selfin, Chief Economist at KPMG UK, said: “While pubs and restaurants benefited from higher demand, in part due to the World Cup, consumers reduced spending on other categories in response to cost-of-living pressures. Consumer-facing services were still 8.5 percent below February 2020 levels, compared to all other services which were 2 percent higher in November.”
Chancellor Jeremy Hunt said: “We have a clear plan to halve inflation this year – an insidious hidden tax that has led to interest rate hikes and mortgage payments, curbing growth here and around the world.
“To help families through this difficult period, we will support an average of £3,500 to each household this year and next, but the most important help we can offer is sticking to the plan to cut inflation in half this year so we can economy is growing again.”
But Shadow Chancellor Rachel Reeves insisted: “Today’s results are just another page in the book of failures, the Tory record for growth.
“The news of further economic pain will be of great concern to families already struggling with the rising cost of living.”
While the GDP numbers will offer hope to businesses and households that have faced significant pressure from rising utility bills and food prices, the stronger-than-expected performance could present a dilemma for the Bank of England as it weighs further rate hikes.
While inflation is expected to fall, higher consumer confidence could make it more difficult to tame rates, forcing the Bank to raise rates again when its Monetary Policy Committee meets in the first week of February.
Thomas Pugh, economist at leading audit, tax and advisory firm RSM UK, said: “A milder recession would mean unemployment rising more slowly, wage growth remaining strong and domestically generated inflation falling slower than expected. This could lead to the Bank of England (BoE) raising interest rates more than expected.”