No UK recession, yet

Commenting on this morning’s UK GDP data Melanie Baker, senior economist at Royal London Asset Management, said:

"The unexpected rise in November GDP reduces the chance that the UK is already in ‘technical recession’, following two consecutive quarters of negative GDP growth.  Business surveys looked consistent with only relatively modest falls in output in December, despite strike activity. Consumer-related data for December so far, looks more resilient than I’d have expected. The World Cup may have boosted activity.

"Even if it turns out that for now the UK has escaped a technical recession, the performance of the UK economy over recent months has been poor and the economy faces a stack of challenges. The consumer still faces substantial cost of living pressures and consumer confidence remains very weak in the UK. Monetary policy has tightened a lot; we’ve had a big jump in mortgage rates and the housing market is slowing. Fiscal policy will be tightening over coming years. You could also add continued strikes, an underperforming health service and the ongoing challenges of Brexit to the list.

"If the economy did end the year on a stronger than expected note with a rise in GDP in December, I would worry about payback in Q1 2023, for example as consumers potentially pull back discretionary spending after Christmas."