December GDP contracted by 0.5%, figures out today showed.
The final quarter of 2022 saw no growth but no contraction while GDP is 0.8% below pre-pandemic levels.
Laura Suter, head of personal finance at AJ Bell, comments on the latest GDP figures: “The UK has avoided a recession by the narrowest of margins. The final three months of 2022 brought no growth but no contraction, meaning the UK has dodged the technical definition of a recession by a hair’s breadth.
“But while we can’t slap the badge of ‘recession’ on the economy, it’s clear the UK is struggling and everyone is feeling the effect of the malaise in the country’s economy. This economic no-man’s land of no contraction or no growth won’t have people celebrating in the street, particularly considering GDP is 0.8% below its pre-pandemic level.
“December was a gloomy month for the UK’s economy, with Christmas failing to bring the economic boost it usually delivers. The economy contracted by 0.5% in the month, a sharp fall from November’s relatively rosy result of rising by 0.1%. If the UK economy can’t get off the floor in the biggest spending month of the year, January’s figures are likely to paint a pretty bleak picture.
“This should have been a buoyant month for the economy, with people going out to spend on Christmas presents, having festive catch-ups with friends and watching the tail end of the football, boosting pub sales. But the cost-of-living crisis curtailed much of our fun, with people preferring to stay in and pinch the pennies instead.
“On top of that strikes squashed some parts of the economy, with rail strikes meaning Christmas parties were called off or nights out delayed, while postal strikes impacted some businesses and doctor strikes reduced the number of GP appointments in the month.
“The government will pounce on these figures as an example of why the IMF and other economists’ predictions of UK economic doom are too downbeat, no doubt latching onto the fact that we’re not in a technical recession. And, perhaps more worryingly for the UK public, the Bank of England may well see this as a sign that they can go higher and harder with rate rises at their next meeting.
“Why does a recession matter to the UK public? Recessions brings slower growth from many companies, meaning fewer pay rises and the potential for job losses as businesses struggle. While the jobs market is still pretty tight, many of those effects could still be felt despite dodging a technical recession.”