The UK economy returned to growth in November, according to official figures that are being closely watched amid fears the prospect of recession remains on a knife edge.
The Office for National Statistics (ONS) reported output growth of 0.3% for the month – recovering from a 0.3% decline witnessed in October when many weather-sensitive sectors were hit by heavy rain.
The data showed retail was a major contributor to that growth.
There are two scenarios under which a recession, that’s two consecutive quarters of contraction, could materialise.
Revisions to ONS figures have the economy recording zero growth in the second quarter of 2023. Any further determination downwards would tick the box because, as things stand, the economy fell by 0.1% in the following June-August quarter.
The other possibility is that the third quarter of negative growth is followed by another between October and December.
Growth has essentially been flatlining due to the impact of the surge in costs since Russia’s invasion of Ukraine in February 2022 and Bank of England action to tame the pace of that price growth.
The series of 14 consecutive interest rate rises imposed by the Bank is designed to choke growth by taking demand out of the economy.
That programme, however, was paused late last summer amid evidence it was having the desired effect as the rate of inflation was down sharply from its peak above 11%.
Data has not flagged renewed concerns since with key indicators for the Bank, such as wage growth, also easing from highs seen in mid-2023.
Financial markets and the Bank are at odds, however, on the timing of potential interest rate cuts – a move that would fan the flames of the current mortgage price war even more.
Markets see the Bank cutting its main interest rate from the current 5.25% level to around 4% over the course of the year, likely beginning in May.
A lift in economic growth will not help the Bank’s position move towards that of the markets and members of the monetary policy committee remain worried that inflation – at 3.9% – is still almost double its target rate of 2%.
Upwards pressures remain the risk of higher prices from disruption to shipping in the Red Sea.
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