Gross domestic product (GDP) measures the value of goods and services produced in the UK. It estimates the size of, and growth in, the economy.

The Office for National Statistics (ONS) estimates GDP grew 0.5% in October 2022, following a 0.6% fall in September which was affected by the additional bank holiday for the State Funeral of the Queen.

Over the three-month period, GDP fell 0.3% compared to the quarter to July 2022.

The ONS noted that the services sector grew 0.6% in October, with the repair of cars and bikes contributing to the figure.

According to Danni Hewson, AJ Bell financial analyst, the surge in demand for second-hand vehicles post-Covid, means “there’s been a corresponding uptick in demand for repair and maintenance as winter approaches”.

Meanwhile output in consumer-facing services grew 1.2% in October, after a 1.7% fall in the previous month.

Elsewhere, production remained broadly flat in the month after 0.2% growth in September.

The ONS stated manufacturing was the only sub-sector “to contribute positively to production”, which was offset by “negative contributions” from electricity, gas, steam and air conditioning supply, as well as water, sewerage and waste management.

However, the construction sector grew 0.8% in October, recording its fourth consecutive increase after 0.4% growth in September, 0.6% in August and 0.2% in July.

Hewson said that the continued resilience of the construction sector and demand for new houses “might have more to do with last year’s housing market than today’s”, adding “there are signs that prices are cooling and that could make a considerable difference to future plans”.

She added that while October’s bounce back was expected, “the story is unchanged; the economy is still shrinking and recession feels inevitable”.

‘Recession could be avoided but could lead to a 75bps base rate hike’

According to Ruth Gregory, senior UK economist at Capital Economics, October’s rebound “won’t prevent contraction in Q4” and “the surprisingly strong rise could tilt the Bank of England towards another bumper 75bps interest rate hike on Thursday 15 December”.

Gregory said: “If GDP avoids a fall of more than 0.2% m/m in November and December, then it won’t contract in Q4 as a whole and a recession in 2022 will be avoided. But with the full effects of the previous rises in inflation and rising interest rates yet to be felt, we think it is too soon to conclude the economy will escape largely scathed.

“For what it’s worth, we think that GDP will contract in Q4 by 0.1% q/q and that the recession will be deeper than most analysts expect, involving a 2% fall in real GDP.

“That said, it now looks as though GDP in Q4 won’t be as weak as the Bank of England’s forecast of -0.3% q/q. As a result, today’s release might increase the chances of the Bank of England repeating November’s 75bps hike.”

This would take bank rate to 3.75%.