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UK avoids recession as economy posts marginal growth in fourth quarter

Published 31/03/2023, 08:47
Updated 31/03/2023, 10:12
UK avoids recession as economy posts marginal growth in fourth quarter

UK avoids recession as economy posts marginal growth in fourth quarter

Proactive Investors - The UK economy grew marginally in quarter four of 2022, according to figures from the Office for National Statistics (ONS), meaning the UK narrowly avoided recession.

Gross domestic product (GDP) is estimated to have increased by 0.1% between October and December, revised from a first estimate of no growth.

Darren Morgan, director of economic statistics at the ONS, said: "The economy performed a little more strongly in the latter half of last year than previously estimated, with later data showing telecommunications, construction and manufacturing all faring better than initially thought in the latest quarter.

"Households saved more in the last quarter, with their finances boosted by the government's energy bill support scheme.

"Meanwhile, the UK's balance of payments deficit with the rest of the world narrowed, driven by increased foreign earnings by UK companies, particularly in the energy sector."

Danni Hewson at AJ Bell said: "As growth goes it’s pretty feeble but remember this was the moment the UK had been expected to enter a recession, so the fact GDP figures have been revised upwards is something to celebrate."

In output terms, the services sector grew by 0.1% and the construction sector grew by 1.3%, while production sector growth was flat.

Despite the modest increase, GDP is still estimated to be 0.6% below where it was before the pandemic, revised upwards from the previous estimate of 0.8% below.

The household savings ratio increased to 9.3% in quarter 4 2022, from 8.9% in the previous quarter.

Real households' disposable income (RHDI) increased by 1.3% this quarter after four consecutive quarters of negative growth.

Gabriella Dickens at Pantheon Macroeconomics noted the UK is still the only G7 economy in which GDP has not recovered yet to its level in quarter four 2019, before the pandemic struck.

“Indeed, GDP still was 0.6% lower than it was three years ago in the UK, whereas it was 5.1% higher in the US, 2.9% higher in Canada, 0.8% in Japan, 1.2% in France, 1.9% in Italy and just back in line in Germany,” she added.

She reckons the economy likely will continue to flatline in the first half of this year.

Read more on Proactive Investors UK

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