UK economy shows zero growth in Q4, narrowly avoiding recession

LONDON (Reuters) – Britain’s economy showed zero growth in the last three months of 2022 – enough to avoid entering a recession for now – but households saw double-digit inflation It faces a grim outlook in 2023 as it continues to struggle with

Monthly gross domestic product data for December showed a contraction of 0.5%, beating expectations of 0.3%, according to the National Bureau of Statistics, amid widespread strikes in the public sector, rail and postal services.

Still, Friday’s numbers should give Prime Minister Rishi Sunak and Finance Minister Jeremy Hunt some reassurance.

Output fell 0.2% in the three months to the end of September, when many businesses temporarily closed to mark Queen Elizabeth’s funeral.

Any rest can only be temporary. The Bank of England predicted last week that the UK would enter a shallow but prolonged recession, starting in the first quarter of this year and lasting five quarters.

Deloitte economist Devapratim De said: “The UK avoided a recession last year, but with the smallest margins. Recent data revisions suggest today’s numbers could be revised down in the coming months. and paints a very different picture.”

The UK’s standard of living has been hit by a spike in inflation, which reached a 41-year high of 11.1% in October, and businesses and households have been hit hard by a sharp rise in interest rates from the BoE after December 2021. You will feel the increased impact.

Output in the fourth quarter was still 0.8% below pre-pandemic levels, in contrast to other major developed economies currently above pre-pandemic levels.

ING economist James Smith said he expects the UK economy to contract by 0.3-0.4% in the first quarter of this year and contract further in the second quarter.

“A recession, or at least a technical recession, is still the base case, but it looks like it will be very mild by historical standards,” he said.

Slow recovery from COVID

Overall in 2022, the UK economy has recovered from the historic blow from the COVID-19 pandemic, growing by 4.0% from 7.6% in 2021.

Business investment in Q4 2022 was up 13.2% year-on-year and is now back to the same level it was three years ago before the COVID-19 pandemic.

But business groups said a big tax hike on profits, due in April, would deter future investment, and on Thursday AstraZeneca (AZN.L) said it would cut some production. announced that he was moving to Ireland. Cheap drug prices.

Retailers also reported cutting inventory levels as consumer demand declined.

Decline in GDP in December was attributed to slump in service production, including reduced medical activity, doctor visits and school attendance, partly due to strikes, while Qatar’s men’s football World Cup topped the list It meant that the level domestic match was postponed.

The drop would have been greater had it not been for the unusually cold weather that led to increased energy production, according to the Bureau of Statistics.

But it also contributed to Britain’s largest ever commodity trade deficit, excluding precious metals, as surges in gas imports from Norway pushed it to a record £64bn ($78bn) in the fourth quarter. Did.

Hunt said Friday’s data showed the UK economy to be more resilient than expected, but the dangers were still not clear.

“We are not out of the woods. Inflation is still too high. It is causing distress to families across the country,” he told the station.

The General Secretary of the British Trade Union Congress, Paul Nowak, has urged Hunt to make room for a significant wage increase in next month’s budget. Hunt said it would be too costly and would exacerbate inflation.

“What we need to get our economy going again is fuel in the tank,” Nowak said.

($1 = £0.8252)

Editing by Kate Holton and Christina Fincher

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