TradingTwist, LONDON, January 13 – After receiving a lift from World Cup drinks and video game sales, Britain’s economy unexpectedly managed to rise in November, lowering the likelihood that it has already entered a recession, but the outlook for 2023 is still bleak.
According to data released by the Office for National Statistics on Friday, the gross domestic product increased 0.1% from October. This was greater than any estimate in a TradingTwist survey of experts, which had predicted a 0.2% decrease.
Due to the growth surprise, Britain would have needed to have a significant decline in output of roughly 0.5% in December in order to meet the criteria for a European recession, which is two consecutive quarters of declining GDP.
In the three months leading up to the end of September, the sixth-largest economy in the world had a 0.3% decline in output as a result of company closures in observance of Queen Elizabeth’s funeral.
Although December was characterised by widespread strikes and negative activity survey readings, HSBC economist Liz Martins observed, “With a fair wind, the UK may now avoid recession.”
The overall situation is still gloomy. According to the ONS, economic output was 0.3% lower in November than it was prior to the pandemic. The output in every other economy in the Group of Seven has surpassed pre-pandemic levels.
In October, consumer price inflation reached a 41-year high of 11.1%, and living conditions are currently experiencing their worst decline in decades. In November, the government’s budget watchdog predicted that in 2023, output would decline by 1.4%.
According to Thomas Pugh, economist at accountants RSM UK, “Looking ahead, consumer spending is likely to weaken as the compression on household real incomes deepens. Therefore, we still anticipate GDP to shrink in the first three quarters of this year.”
Workers in the public sector and rail industry have gone on strike in droves in an effort to get larger wage raises as a result of high inflation.
“The most crucial help we can give is to keep to the aim to halve inflation this year so we get the economy growing again,” said Finance Minister Jeremy Hunt.
In November, the Bank of England predicted that by the end of the year, inflation would fall to about 5%. Investors anticipate that the BoE will increase interest rates to 4% from 3.5% on February 2 in an effort to quell inflationary pressures.
WORLD CUP INCREASES PUBLIC SPENDING
Despite widespread rail and postal strikes, Britain’s huge services sector had the strongest performance in November, with output increasing by 0.2% on a monthly basis.
According to the ONS, a large portion of the increase was due to people going to the pub to watch the men’s World Cup, which resulted in a 2.2% increase in output for food and beverage services on the month, as well as early pre-Christmas spending on video games.
In November, the GDP fell by 0.2 percentage points due to a seasonal decline in COVID-19 vaccines.
In November, Britain’s goods trade imbalance increased to $19.1 billion, slightly more than the $14.9 billion expected in the TradingTwist poll of economists.
Brexit has harmed trade with the European Union, though it has been difficult to quantify the extent because of changes in data gathering, differences between British and EU data, and pandemic impacts.
According to HSBC’s Martins, exports have increased by almost 20% since June. However, according to the most recent ONS data, exports to the EU are now 4.5% lower than they were before the pandemic, while exports to non-EU countries are 0.4% higher.
