GDP fell in December and flatlined in Q4
The UK’s monthly gross domestic product (GDP) is estimated to have fallen by 0.5% in December, but growth in the previous two months has saved the economy from entering a recession, data released by the government on Friday showed.
The Office for National Statistics (ONS) reported a GDP flatline in the three months to December, 2022. A negative figure in the last quarter would have sent the UK into recession, as the economy also shrank between July and September. A recession is technically defined as two consecutive quarters of negative growth.
Kevin Brown, savings specialist at financial services group Scottish Friendly, commented that while the UK had technically avoided falling into recession, living standards are still falling for many households.
“Spring has nearly sprung, but the UK economy shows little sign of growth,” he said. “Household incomes remain depressed because of the dual impact of inflation and rising interest rates. Until the downward pressure on pay that is hurting millions of workers eases, it seems unlikely that the UK economy will spur into life.”
Meanwhile, annual GDP output is estimated to have grown by 4.1% in 2022, following growth of 7.4% in 2021.
According to the ONS report, the services sector fell by 0.8% in December, with the largest contributions to this fall coming from human health activities, education, arts, entertainment and recreation activities, and transport and storage.
Output in consumer-facing services also fell by 1.2%, while production output grew by 0.3% in December. The construction sector was flat in the last month of 2022 after a fall of 0.5% in November 2022.
The ONS said there was “anecdotal evidence” to suggest that rail and postal strikes had negatively impacted some businesses during the latter part of last year.
“While the direct impact of the strikes by rail and postal workers can be seen in the rail transport and postal and courier activities industries, we are not able to isolate the impact of these strikes from other factors across the wider economy,” the ONS stated in its latest GDP report. “However, there was anecdotal evidence to suggest that this industrial action had an impact across a wide range of industries.”
Brown noted that conditions are set for the economy to gradually improve this year, but many households are likely to focus on strengthening their finances in preparation for rising mortgage costs.
“By shopping around, people will find banks and building societies are paying better rates, but this may not necessarily be the best option if they are looking to grow their money long-term,” he said.
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