A boost for pubs and bars during the World Cup helped the UK economy grow by 0.1 per cent in November, a better than expected performance which has raised hopes that Britain may avoid sliding into recession in 2022.
The official GDP figures released by the Office for National Statistics on Friday morning beat analysts’ expectations who had predicted a fall of 0.3 per cent.
With inflation forecast to fall in the coming months and the pressure on energy bills set to ease thanks in part to warmer than expected winter weather and a drop in the price of gas, the economic outlook is not looking slightly brighter.
To add to the growing optimism, Tesco and Marks & Spencer both recorded bumper Christmas trading figures on Thursday suggesting Britain’s economy may be showing greater resilience than predicted in the face of the cost of living crisis.
A recession is defined as two quarters or more in a row of falling output. With GDP falling by 0.3 per cent between July and September, economists widely expected a similar fall in the final quarter of 2022 - despite a 0.5 per cent rise in October.
But ONS Director of Economic Statistics Darren Morgan told BBC Radio 4’s Today Programme that for the UK to enter recession in the fourth quarter of 2022, GDP in December would have to contract by 0.6 per cent.
He said that growth in November had been driven by increases in telecommunications and computer programming as well as a pick up in business for employment agencies.
But the hospitality sector, which has been so badly hit by Covid lockdowns and strikes, also saw a welcome lift during the World Cup in Qatar as fans flocked to pubs and bars to watch matches.
Mr Morgan said: “What I would also point out is pubs and bars, an area of the economy that has been having some really tough times actually, and they did well in November. And they tell us they benefited from the start of the World Cup, as it seems many of us were full of hope when it started in November, and went out to enjoy the games.”
The Bank of England predicted in November the UK would officially enter recession when figures for GDP in December are released next month and then remain in recession throughout 2023.
But while Friday’s figures are a slowdown on October’s 0.5 per cent growth, that was largely due to comparisons with September’s 0.6 per cent slump - partly caused by the bank holiday for the state funeral of Queen Elizabeth II.
In the three months from July to September, the ONS said the economy shrank by 0.3 per cent. But once again those figures reflect the negative economic effects of the one off September bank holiday.
Despite the unexpected overall growth in November, the ONS said manufacturing output shrank again while strikes hit the transport and postal sectors.
And economists warned that while Britain may narrowly avoid recession in 2022, the UK could still face a slowdown in 2023.
Ruth Gregory Senior UK Economist at Capital Economics said: “The small 0.1 per cent gain in real GDP in November suggests the economy was not as weak in Q4 as we had previously thought.
“But even if the economy does a bit better than expected in Q4, it is at best stagnating. And it is too soon to conclude the economy will be able to get through this period of high interest rates and high inflation largely unscathed. We still think a recession is on its way in the first half of 2023.”
Yaelâ¯Selfin, Chief Economist at KPMG UK, said: “While pubs and restaurants benefited from higher demand partly thanks to the World Cup, consumers reined in their spending on other categories in response to the cost-of-living squeeze. Consumer-facing services were still 8.5 per cent below their level in February 2020, compared to all other services that were 2 per cent above in November.”
Chancellor Jeremy 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.”
But Shadow Chancellor Rachel Reeves insisted: “Today’s results are just another page in the book of failure that is the Tory record on growth.
“The news of further economic pain will be deeply concerning to families already struggling with the soaring cost of living.”
While the GDP figures will offer hope to businesses and households which have faced a major squeeze as energy bills and food prices rise, the stronger than expected performance could pose a dilemma for the Bank of England as it weighs further hikes in interest rates.
Although inflation is set tofall, greater consumer confidence may make it harder to tame, forcing the Bank to raise rates again when its Monetary Policy Committee meets in the first week of February.
Thomas Pugh, economist at leading audit, tax and consulting firm RSM UK, said: “A milder recession would mean that unemployment rises more slowly, wage growth stays strong and domestically generated inflation falls more slowly than expected. This could result in the Bank of England (BoE) raising rates by more than expected.”
