feeling the beat around the UK’s economy;
- Following a 0.2% decline in Q3, the UK’s GDP now drives zero growth.
- In December, output in the United Kingdom fell by 0.5%, due in part to strikes.
- Although the economy grew 4% in 2022, it is still lower than its 2019 records.
- Economists anticipate that the UK will experience a recession in the first half of 2023.
- Rising gas imports result in a record goods trade deficit.
In the last three months of 2022, the UK’s economy showed zero growth, dodging recession for now but introducing new challenges for 2023 as families are trying to keep up with the two-digit inflation.
The Office for National Statistics said that the monthly GDP for December contracted by 0.5%, which was beyond the forecast of 0.3%, as a result of the broader strikes across the public sector, including postal and rail services.
Yet, the Friday reports extend some degree of relief to Prime Minister Rishi Sunak and Finance Minister Jeremy Hunt, while they aim to implement measures that could cause a rebound through their annual budget to be out by March 15th.
In the three months leading up to September, output fell by 0.2%, owing primarily to businesses temporarily closing in honor of Queen Elizabeth’s final reign. However, any additional drop in the fourth quarter’s output would have meant falling under Europe’s definition of recession.
The current relief is only temporary. According to the Bank of England’s forecast last week, Britain is likely to enter a shallow but prolonged period of recession, which will begin in the first quarter and last for five quarters.
The Deloitte Economist, Debapartim De, said, “The UK avoided a recession last year but by the slimmest of margins. Going by recent data revisions, today’s figures could well be revised downwards in a few months, painting a very different picture.”
The living standards of Britain are battered by soaring inflation, reaching 11.1% in October, a 41-year record high. British companies and families will also be hit by the BOE’s sudden surge in interest rates after December 2021.
Unlike other significant advanced economies hovering well above their pre-pandemic figures, Britain’s fourth-quarter output was 0.8% less than its pre-pandemic phase.
James Smith, an ING economist, stated he anticipated the UK’s economy to plunge by 0.3 to 0.4% through the first quarter of this year, followed by an insignificant fall in the second quarter.
He said, “Recession, or at least a technical one, remains the base case. But this looks like it is going to be very mild by historical standards.”
Sluggish Recovery Post-COVID
Throughout 2022, the UK secured a growth rate of 4.0% as compared to its 7.6% rise in 2021, recovering from a notable blow from the COVID-19 pandemic.
As for business investments, they stood 13.2% higher in the last 2022 quarter than the previous year, now springing back to the level they were at before the COVID-19 pandemic three years ago.
Moreover, business groups stated that future investments may get discouraged due an abrupt rise in taxable profits that would be effective starting in April.
AstraZeneca (AZN.L) said on Thursday that it would transfer some of its production work to Ireland, partly due to Britain’s medical sector driving a tough bargain on drug prices.
Retailers are forced to cut down their levels of inventory due to narrowing consumer demand.
The plunge in December’s GDP was spurred by a decline in service output, mounting from reduced medical operations, doctor’s visits, and diminishing school attendance, partly because of strikes, while at the same time the men’s soccer World Cup in Qatar implied delays in the top-level domestic games.
According to the statistics office, the decline would have been greater if not for the unusually cold weather, which resulted in increased energy generation.
Even so, it contributed to the UK’s highest-ever goods trade deficit, not including precious metals, while the upswinging costs of gas imports from Norway in the fourth quarter shot this to a record of 64 billion pounds (approximately $78 billion).
Based on Friday’s reports, Hunt said that Britain’s economy was more enduring than anticipated, but it still isn’t out of danger.
He told the broadcasters that “We are not out of the woods – inflation is still much too high. That is causing pain for families up and down the country.”
Paul Nowak, the general secretary of Britain’s Trades Union Congress, urged Hunt to include larger pay rises in the upcoming month’s budget, a matter that Hunt claims would increase costs and worsen inflation.
Nowak said, “It’s the fuel in the tank that our economy needs to get moving again.”
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- Published By Team Timeswire