LONDON: Britain’s economic system grew barely extra strongly than anticipated in November however stays prone to slipping into a light recession, a possible blow for Prime Minister Rishi Sunak earlier than an election anticipated in 2024.
Gross home product (GDP) expanded by 0.3% after a fall of 0.3% in October, barely beating economists’ forecasts for 0.2% development in a Reuters ballot.
However output shrank by 0.2% within the three months to the top of November, figures from the Workplace for Nationwide Statistics (ONS) confirmed on Friday, greater than the anticipated 0.1% fall.
A contraction or probably even flat output in December may result in a second consecutive quarter of falling output, the ONS stated. This could place the economic system in a shallow recession.
“It stays touch-and-go whether or not the economic system tipped right into a technical recession within the second half of 2023,” Investec economist Sandra Horsfield stated. “In both case, a greater description of the development is likely to be stagnation. The recession, if it did happen, seems to have been as delicate as they arrive.”
Sterling was little modified in opposition to the US greenback after the info, however authorities bond yields fell as markets priced in a barely larger probability that the Financial institution of England (BoE) will start to chop rates of interest in Could.
Britain’s economic system struggled to realize momentum in 2023, as households had been squeezed by fast inflation and the very best BoE rates of interest in 15 years.
European weak point
Financial output in November was solely 0.2% larger than a yr earlier and has grown by simply 2.5% since 2019.
A lot of Europe’s economic system is weak too, due partly to the after-effects of Russia’s full-scale invasion of Ukraine in February 2022.
Germany’s economic system shrank within the third quarter, and knowledge on Tuesday displaying an unexpectedly huge drop in industrial output in November raised recession fears in Europe’s largest economic system.
Against this, the US economic system grew at an annualised fee of greater than 5% within the third quarter.
“The longer-term image stays considered one of an economic system that has proven little development over the past yr,” ONS chief economist Grant Fitzner stated after the British GDP numbers had been revealed.
“GDP bounced again within the month of November, nonetheless, led by companies with retail, automobile leasing and pc video games firms all having a buoyant month.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, described it as a “coin toss” whether or not output would fall within the fourth quarter.
Whereas surveys have pointed to an additional restoration of enterprise exercise in December, renewed medical doctors’ strikes would scale back healthcare provision and retail gross sales seemed patchy, he stated.
Hopes for higher 2024
The federal government’s Workplace for Price range Accountability (OBR) has forecast development of 0.6% for 2023 and 0.7% for 2024 – a weak backdrop for the nationwide election that anticipated within the second half of 2024.
Some economists see extra scope for a pick-up in development this yr than the OBR or the even gloomier BoE. Inflation has dropped under 4% and mortgage charges have fallen as lenders anticipate the central financial institution to chop borrowing prices later this yr.
“The economic system ought to shake off its torpor in 2024,” Tombs stated, predicting wage development and decrease inflation and rates of interest would increase households’ actual disposable earnings by 2%.
Finance minister Jeremy Hunt, responding to Friday’s knowledge, stated inflation was nonetheless weighing on development however the tax cuts for companies and employees he introduced in November would increase Britain’s longer-term prospects.
Rachel Reeves, the opposition Labour Celebration’s would-be finance minister, stated the weak development meant Britain’s total tax burden as a share of GDP remained the very best in 70 years.
Gross home product (GDP) expanded by 0.3% after a fall of 0.3% in October, barely beating economists’ forecasts for 0.2% development in a Reuters ballot.
However output shrank by 0.2% within the three months to the top of November, figures from the Workplace for Nationwide Statistics (ONS) confirmed on Friday, greater than the anticipated 0.1% fall.
A contraction or probably even flat output in December may result in a second consecutive quarter of falling output, the ONS stated. This could place the economic system in a shallow recession.
“It stays touch-and-go whether or not the economic system tipped right into a technical recession within the second half of 2023,” Investec economist Sandra Horsfield stated. “In both case, a greater description of the development is likely to be stagnation. The recession, if it did happen, seems to have been as delicate as they arrive.”
Sterling was little modified in opposition to the US greenback after the info, however authorities bond yields fell as markets priced in a barely larger probability that the Financial institution of England (BoE) will start to chop rates of interest in Could.
Britain’s economic system struggled to realize momentum in 2023, as households had been squeezed by fast inflation and the very best BoE rates of interest in 15 years.
European weak point
Financial output in November was solely 0.2% larger than a yr earlier and has grown by simply 2.5% since 2019.
A lot of Europe’s economic system is weak too, due partly to the after-effects of Russia’s full-scale invasion of Ukraine in February 2022.
Germany’s economic system shrank within the third quarter, and knowledge on Tuesday displaying an unexpectedly huge drop in industrial output in November raised recession fears in Europe’s largest economic system.
Against this, the US economic system grew at an annualised fee of greater than 5% within the third quarter.
“The longer-term image stays considered one of an economic system that has proven little development over the past yr,” ONS chief economist Grant Fitzner stated after the British GDP numbers had been revealed.
“GDP bounced again within the month of November, nonetheless, led by companies with retail, automobile leasing and pc video games firms all having a buoyant month.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, described it as a “coin toss” whether or not output would fall within the fourth quarter.
Whereas surveys have pointed to an additional restoration of enterprise exercise in December, renewed medical doctors’ strikes would scale back healthcare provision and retail gross sales seemed patchy, he stated.
Hopes for higher 2024
The federal government’s Workplace for Price range Accountability (OBR) has forecast development of 0.6% for 2023 and 0.7% for 2024 – a weak backdrop for the nationwide election that anticipated within the second half of 2024.
Some economists see extra scope for a pick-up in development this yr than the OBR or the even gloomier BoE. Inflation has dropped under 4% and mortgage charges have fallen as lenders anticipate the central financial institution to chop borrowing prices later this yr.
“The economic system ought to shake off its torpor in 2024,” Tombs stated, predicting wage development and decrease inflation and rates of interest would increase households’ actual disposable earnings by 2%.
Finance minister Jeremy Hunt, responding to Friday’s knowledge, stated inflation was nonetheless weighing on development however the tax cuts for companies and employees he introduced in November would increase Britain’s longer-term prospects.
Rachel Reeves, the opposition Labour Celebration’s would-be finance minister, stated the weak development meant Britain’s total tax burden as a share of GDP remained the very best in 70 years.
