- Written by Nick Edser & Darshini David
- BBC news
image source, Getty Images
The UK economy rebounded in November after contracting the previous month due to an increase in retail sales.
Official figures showed economic growth in November was 0.3%, stronger than expected.
The Office for National Statistics said Black Friday sales boosted retailers, with the services sector leading the recovery.
But economists said Britain was on the brink of avoiding recession, with the economy showing “little growth” over the past year.
A recession is usually defined as when the economy contracts for two consecutive three-month periods (or quarters). This criterion would be met if the UK economy contracted between October and December.
ONS chief economist Grant Pfitzner told the BBC that November’s recovery was driven by “strong retail sales, but also car leasing, computer gaming and fewer strikes than in the previous month”. .
“We have received reports from a significant number of businesses that back Friday sales were strong and had a positive impact not only on the retail sector, but also on warehousing, delivery services and some manufacturing industries.”
But although monthly growth was stronger than expected, the UK economy remained in a fragile state, with the economy contracting by 0.2% in the three months to November, ONS figures showed.
Economic activity will need to expand further in November and December to meet the government’s commitment to grow the economy by the end of 2023.
But economists predict that Britain’s ability to avoid recession will ebb and flow.
Ruth Gregory, deputy chief UK economist at Capital Economics, said November’s recovery “means we have probably avoided a slowdown in 2023”, but said she expected no growth in the final three months of the year. He said he expected it.
Growth prospects for 2024 remain uncertain.
Wage growth is outpacing inflation on average, but more than one million households will be exposed to higher interest payments as they remortgage in the coming months. Businesses that rely on healthy consumer spending are paying the price, with consumer services still more than 5% smaller than before the pandemic.
Samuel Tombs of Pantheon Macroeconomics said it was a “toss of a coin” whether the UK avoided recession at the end of last year.
But, he added, “employment is still rising and business and consumer confidence is recovering, so calling this a recession would be a stretch even though GDP has actually declined slightly.” He added.
“I think it’s important to remember that a recession is not just one very small negative number followed by a very small negative number,” ONS’s Pitzner said. “That is a significant and sustained decline in production. We do not expect another recession.” that. “
Speaking after the latest growth figures, Chancellor of the Exchequer Jeremy Hunt said: “November’s growth is welcome news, but returning to our 2% target for inflation will slow growth.”
Until relatively recently, the Bank of England has been raising interest rates to curb inflation, the pace at which prices rise.
While higher interest rates can reduce inflation, they can also reduce economic growth.
Inflation slowed to 3.9% in the year to November. This level is still above the central bank’s 2% target, but there are growing calls from some quarters for a rate cut.