UK economy shows 0.3% growth in November

More robust retail sales helped the UK’s economy to rebound in November after it shrank during the previous month.

Stronger Monthly Performance, Yet Fragile State

In November, the UK economy demonstrated a 0.3% growth, surpassing expectations, with the services sector leading the rebound, fueled by Black Friday sales. 

However, over the three months to November, the economy contracted by 0.2%, reflecting a fragile state. Economists suggest the risk of a recession remains, as a contraction between October and December could trigger a downturn.

Close Call on Recession Risk

A recession, defined by two consecutive quarters of economic contraction, is a looming concern, with the UK economy at risk if it shrinks in Q4 2023. 

While November’s growth provides optimism, the uncertain economic landscape suggests a narrow margin for avoiding a recession. 

The government’s target to boost the economy by the end of 2023 hangs in the balance.

Challenges for 2024 Growth

Despite wage growth outpacing inflation, challenges persist for 2024 growth. Over a million households face potential higher interest repayments on mortgages, impacting consumer spending. Consumer-facing services remain over 5% smaller than pre-pandemic levels. 

The UK’s growth prospects for the coming year remain uncertain, with various economic factors influencing the trajectory.

Analysts Assessing the Situation

Analysts express varying views on the likelihood of a recession, with Ruth Gregory of Capital Economics suggesting a narrow escape in 2023 but expecting zero growth in the final quarter. 

Samuel Tombs at Pantheon Macroeconomics sees the situation as a “coin toss,” emphasizing the need to consider rising employment and recovering confidence in labeling any downturn as a recession.