Gross domestic product (GDP) for December 2022 was flat in quarter four. The economy had shrunk by 0.3 percent between July and September. ONS figures for November 2022 revealed the economy grew by 0.1 percent in November, despite predictions suggesting it would contract by 0.3 percent. This means that GDP over the last three months of 2022 was flat which would suggest the country is going to narrowly avoid a recession.
A recession is commonly acknowledged as being a period in which a nation experiences two consecutive quarters of negative growth.
Negative growth in the final quarter of last year would have signalled a recession as the economy shrank by 0.3 percent in the third.
With the UK’s cost of living crisis set to continue for the foreseeable future, many were predicting such an economic downturn was a likely conclusion.
In their last forecast, policymakers for the Bank of England predicted GDP to grow by 0.1 percent over the last three months of 2022.
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Jeremy Batstone-Carr, the European strategist at Raymond James Investment Services, shared why he believed the UK “has escaped recession by the skin of its teeth in 2022”.
He explained: “With December’s contraction of 0.5 percent, skirting recession by the slimmest of margins, the UK has achieved a minor economic victory.
“We are still in for the downturn which so far has been barely kept at bay. It will be shorter and shallower than previously thought, as per the Bank of England’s forecasts.
“The lagged impact of earlier base rate increases combined with additional policy tightening will ensure it happens.
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“However, whether we are officially in recession will not make much difference to most people – it will simply feel like a continuation of the present sluggishness and cost-of-living woes.”
Despite this latest news, the Bank of England is still expecting a recession to take place sometime in 2023.
However, this period of negative economic growth is expected to be shallow and shorter than previously predicted.
The central bank has controversially raised interest rates 10 consecutive times in the past year to try to tame inflation which some believe has contributed to the looming threat of recession.
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Currently, the Bank of England’s base rate is at four percent and Consumer Price Index (CPI) inflation for December 2022 is sitting at 10.5 percent.
Overall, annual GDP output is estimated to have grown by 4.1 percent in 2022 but this follows growth of 7.4 percent in 2021.
Alice Haine, a personal finance analyst at Bestinvest, warned that the country’s economic woes are not yet over even if a recession has yet to take place.
Ms Haine added: “Consumer spending may continue to falter, particularly if insolvencies ramp up and more people lose their jobs.
“Throw in April’s planned rise in corporation tax and frozen personal tax thresholds, as well as the uncertainty that comes with a war in Ukraine, interest rates at a 15-year high and labour shortages – and the outlook from here appears subdued.”
However, she also highlighted that there are reasons for Britons to feel optimistic about the year ahead.
The finance expert said: “Light at the end of the cost-of-living tunnel is already apparent with oil and gas prices retreating, inflation easing, mortgage costs dropping from their October highs and saving rates on the up.
“Plus, the British can often be surprisingly resilient in times of adversity, making the best of it when all seems lost.”
