UK Economy Returns To Growth On Services, Production

(RTTNews) - The UK economy recovered as expected in November supported by services and production, but the growth was not sufficient to soothe recession fears as even a slight downturn in December will result in two consecutive quarters of contraction.

Real gross domestic product expanded 0.3 percent in November, offsetting the 0.3 percent decrease in October, the Office for National Statistics said Friday.

In November, services output was the largest contributor to the growth, expanding 0.4 percent after posting a revised 0.1 percent fall in October.

In addition, industrial production rose 0.3 percent as expected, which was in contrast to the revised 1.3 percent decline in October. Within production, manufacturing output gained 0.4 percent following four consecutive falls.

Factory growth was driven by strong output of pharmaceutical products and pharmaceutical preparations, data showed. Manufacturing was forecast to climb 0.3 percent.

Meanwhile, construction output fell 0.2 percent. Nonetheless, the pace of decline halved from the 0.4 percent drop in October.

In the three months to November, GDP dropped 0.2 percent from the preceding period, the ONS said.

The decline reflects 1.5 percent fall in production and 0.6 percent decrease in construction, while services showed no growth.

Chancellor Jeremy Hunt said, "While growth in November is welcome news, it will be slower as we bring inflation back to its 2 percent target."

Latest data showing that GDP grew 0.3 percent in November but fell 0.2 percent in the three months to then, indicates how fragile UK economic growth is right now, British Chambers of Commerce Director of Policy and Insight Alex Veitch said.

"It's likely the economy will be stuck in the slow lane for the foreseeable future," Veitch added.

Even if a recession in 2023 is avoided, the situation suggests that the economy has done no better than to stagnate in the second half of 2023, Capital Economics economist Ruth Gregory said.

That may be the story for early this year too, the economist added.

Earlier in a note, ING economist James Smith said things are looking brighter as interest rate cuts will dampen the mortgage squeeze and gift the government with extra room for tax cuts.

Although a dramatic acceleration in growth is unlikely this year, the chances of a recession have fallen, the economist observed.

Elsewhere, the National Institute of Economic and Social Research said the UK economy flatlined in the fourth quarter. GDP is forecast to grow 0.2 percent in the first quarter of 2024.

The NIESR said these forecasts remain broadly consistent with the longer-term trend of low, but stable economic growth in the UK.

Separate data from the ONS showed that the visible trade gap narrowed to GBP 14.2 billion from GBP 15.9 billion in October as exports grew 0.4 percent, while imports fell 3.3 percent.

The overall trade balance covering both goods and services fell sharply to GBP 1.4 billion from GBP 3.2 billion.