Experts note there are signs Britain may pull through
Retail sales came in weaker in the three months through September, while the UK gross domestic product remained flat – but has that prompted recession fears?
Two consecutive quarters of contraction would mean a technical recession, a Bloomberg report noted, and a change that small could revive talk around the possibility of a recession by the second half of the year as all forecasters expect no change to the initial estimate of GDP growth.
However, there are economists who see a chance of a downgrade, including Dan Hanson, senior UK economist at Bloomberg Economics. “The ONS is likely to confirm that GDP stagnated in the third quarter, but we do think there is some risk output is revised lower,” he said. “The first estimate showed GDP fell, just not by enough to tip the rounding, and since then the retail sales data has been revised down. The statistics wouldn’t need to find much more weakness for GDP to register a 0.1% fall.”
Signs of positive economic growth
Thomas Pugh, economist at RSM UK, said there is a chance GDP growth will remain marginal over the next year as there is optimism in business and consumer surveys. “Growth is likely to remain marginal over the next year, meaning that it wouldn’t take much of a deterioration in sentiment or economic conditions to tip the UK into a recession,” said Pugh.
The report said there are “plenty” of signs Britain will pull through without a recession, as there is a chance of easing inflation and the return of real wage growth. These “signs” include:
- Data on Friday showed the purchasing managers’ survey measuring private sector activity jumping to a six-month high in December, driven by a more resilient services
- UK household confidence also ticked up in GfK’s gauge to its second-highest reading since Russia’s invasion of Ukraine sent energy and grocery bills soaring
- The housing market is continuing to show surprising resilience with prices rising month-on-month in November, according to Halifax and Nationwide
Chris Hare, economist at HSBC, said the PMI represents a prospective improvement “relative to the lackluster ‘hard’ UK data,” that is, weak GDP figures for the third quarter of 2023 and October.
“There are reasons to expect a gradual rise in UK growth,” Hare said. “After all, the cost-of-living squeeze is past its worst, with real household incomes now rising, while the dovish shift in market rate expectations has eased borrowing cost pressures.”
Retail sales figures due Friday may show a month over month increase for November, according to the report. Inflation data could also show the weakest price pressures in two years, with the Consumer Price Index expected to decrease to 4.3% in November from the prior month’s 4.6%.
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