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UK economy flatlines but avoids recession

UK economy flatlines but avoids recession
Emma Lunn
Written By:
Emma Lunn

UK gross domestic product (GDP) is estimated to have shown no growth from July to September 2023 (Q3), according to the Office for National Statistics (ONS).

Estimates show that UK GDP grew 0.2% in September, following 0.1% growth in August (revised down from 0.2%). However, GDP was flat over the three months to September.

This was better than had been expected by estimates among economists, who forecast a 0.1% contraction. However, the growth picture was weaker than in the second quarter of 2023, when the economy expanded by a modest 0.2% quarter-on-quarter.

In output terms, Q3 2023 saw a 0.1% fall in the services sector, which offset a 0.1% increase in construction output and broadly flat output in the production sector.

Compared with the same quarter a year ago, GDP is estimated to have increased by 0.6% in Q3 2023. But the ONS pointed out that in the same quarter last year, there was an additional bank holiday for the Queen’s funeral and many businesses closed or operated differently on this day.

‘UK economy surprisingly resilient’

Nicholas Hyett, investment analyst at Wealth Club, said: “The UK economy remains surprisingly resilient, with GDP growth beating expectations and still in positive territory despite pressure from higher interest rates, higher input costs and the cost of living squeeze.

“Consumers continue to feel significant pain, and there are some technical reasons behind the positive GDP growth, particularly in the healthcare sector where the Covid booster jab campaign and a marginal decline in industrial action month-on-month both increased output. But there are also signs of genuine progress in high value service areas, like engineering and technical analysis.”

UK avoids recession

Danni Hewson, AJ Bell head of financial analysis, said: “No growth is not exactly the kind of headline any Government wants but with this last lot of GDP figures the UK economy has at least avoided falling into a technical recession this year.

“And despite strikes on the railways and by junior doctors, September did deliver a sliver of growth as this year’s Covid vaccine programme was rolled out and the unseasonably warm weather helped reinvigorate the ailing construction sector.

“But cost-of-living pressures are still strangling consumer-facing services with retailers punished further by high temperatures, which meant no one was buying winter woollens, and though summer’s last hurrah did tempt us to get out and about, budget constraints have hampered any chance of a post-pandemic recovery.”