UK Economic Growth Rebounds in November After Shrinking in October

The UK economy showed a rebound in November, growing by 0.3%, according to the Office for National Statistics (ONS). This growth was driven primarily by the services sector, with retail sales contributing significantly due to Black Friday promotions. However, the economy had shown “little growth” over the past year, and economists are uncertain about the UK’s ability to avoid a recession.

The ONS reported that the economy had shrunk by 0.2% in the three months leading up to November. To meet the government’s pledge of growing the economy by the end of 2023, there will need to be further expansion between November and December. Economists predict that it will be a close call as to whether the UK can avoid a recession, defined as two consecutive quarters of negative growth.

Grant Fitzner, the chief economist at the ONS, stated that the rebound was due to strong retail sales, as well as growth in car leasing, computer games, and fewer strikes than in previous months. He noted that many companies reported positive impacts not just on the retail sector but also on warehousing, couriers, and some manufacturing sectors.

Despite the monthly growth being stronger than expected, the UK economy remains fragile. Wage growth is outpacing inflation, but over a million households face higher interest repayments as they re-fix mortgages. Businesses that rely on consumer spending are being affected, with consumer-facing services still over 5% smaller than before the pandemic.

The definition of a recession and its potential impact on individuals was further discussed in the article. The ONS’s Mr. Fitzner emphasized that a recession is not just a small negative number followed by another small negative number, but a significant and sustained fall in output. He does not expect to see that.

Chancellor Jeremy Hunt responded to the latest growth figures, acknowledging the welcome news but emphasizing that growth will be slower as they work to bring inflation back to its 2% target. The Bank of England has been raising interest rates to control inflation, which currently stands at 3.9% in the year to November. While higher interest rates can help control inflation, they can also dampen economic growth.

The Bank of England governor, Andrew Bailey, has not yet indicated any plans for interest rate cuts, despite calls from some due to the recent slowdown in inflation. The ONS’s Mr. Fitzner also expressed his disagreement with a resigning ex-minister, Chris Skidmore, who quit over government energy plans.

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