Sunday, 5 Feb 2023

UK defies recession forecast as economy grew in November

John Redwood says cutting taxes will ‘stave off’ a recession

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World Cup punters flocking to bars and pubs helped boost the economy by 0.1 percent in November, the Office for National Statistics (ONS) said yesterday.

Economists had predicted a negative growth figure of around 0.2 percent for the same month.

Households and businesses have been severely impacted by high inflation and intense cost pressures.

Mr Hunt said: “We have a clear plan to halve inflation this year – an insidious hidden tax which has led to hikes in interest rates and mortgage costs, holding back growth here and around the world.

“To support families through this tough patch, we will provide an average of £3,500 support for every household over this year and next – but the most important help we can give is to stick to the plan to halve inflation this year so we get the economy growing again.”

The Bank of England was among public bodies to have forecast that the UK fell into recession during the third quarter of 2022.

A recession is defined as two three-month periods, or quarters, of shrinking economic output in a row.

Kitty Ussher, chief economist at the Institute of Directors, said: “This is stronger activity than was expected for November and so will further contribute to the improvement in market sentiment we have seen in the last few weeks.

“Given we know the economy also grew in October – albeit driven by a rebound from the period of state mourning – it is no longer certain that the economy will meet the technical definition of a recession when the final data for 2022 is in.” Jonathan Moyes, head of investment research at the Wealth Club, said many will be surprised by the ONS figures.

He added: “We have seen retailers report stronger than expected earnings reports for quarter four over the past week, and it appears a stronger than expected consumer services, and services more broadly, have helped the UK economy defy gloomy expectations.

“It may be too soon to mark the beginning of a turn in sentiment for the UK, but a quiet consensus appears to be forming. Energy prices are falling sharply, China is reopening and interest rate expectations have eased significantly.”

Inflation started to dip in November when it dropped to 10.7 percent from a 41-year high of 11.1 percent a month earlier.

It is expected to drop further through this year, bringing welcome relief to Britons struggling with the cost-of-living crisis and supply chain pressures amid the war in Ukraine.

Darren Morgan, ONS director of economic statistics, said: “The economy grew a little in November, with increases in telecommunications and computer programming helping to push the economy forward.

“Pubs and bars also did well as people went out to watch World Cup games.

“This was partially offset by further falls in some manufacturing industries, including the often erratic pharmaceutical industry, as well as falls in transport and postal, partially due to the impact of strikes.

“Over the last three months, however, the economy still shrank – mainly due to the impact of the extra bank holiday for the funeral of Her Majesty Queen Elizabeth in September.”

The Federation of Small Businesses (FSB) warned that although the economic expectations for the fourth quarter of 2022 is better than expected, it is “still far from rosy” for small firms.

Hundreds of thousands of shoppers were impacted by a swathe of strike action in December, costing the hospitality and retail sectors millions in Christmas earnings.

Martin McTague, FSB national chair, said: “With costs remaining high for small firms and households alike, policymakers cannot rest on their laurels. Inflation needs to be brought down, there remains huge uncertainty over energy prices, and consumer confidence remains stubbornly low.

“We’re hearing from small businesses who aren’t just worried for themselves and their own firms – they are worried for the future of their fellow local businesses, and the vibrancy of their community.”

He called on the Government to expand business rate relief, crack down on late payments, and expand the energy support.

He said: “The Government needs to grasp the scale of the threat that remains.”

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