UK GDP – recession avoidance

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

"Although Q3 Gross Domestic Product (GDP) was a touch stronger than expected, the details were downbeat with falls in consumer spending and business investment. The contribution to growth from net trade looks to have been much more positive than expected, but partly on the back of falling imports. That itself will likely partly reflect weakness in domestic demand.

"Looking at the monthly figures, it appears to paint a more positive story, with growth in September slightly stronger than in August. However, less industrial action in the health service, and warmer than average temperatures, appear to have played some role and the broader run of data still suggests this is an economy that has grown little since early 2022. 

"The UK continues to avoid going into a technical recession, which would need two consecutive quarters of negative growth, though it clearly wouldn’t take much of a back revision for Q3 GDP to have fallen. The Purchasing Managers’ Index (PMI) business surveys continue to look consistent with modestly falling private sector output. If the UK continues to experience little to no growth, the experience of the economy, including the jobs market, may not be very different than it would have been had the UK experienced short mild recession. 

"This release is likely to have little net effect on the Bank of England’s thinking. According to its recently published November Monetary Policy Report, it was expecting flat GDP in Q3 and 0.1% in Q4."