The United Kingdom's (UK) gross domestic product (GDP) was flat in the three months to December 2022, helping the economy avoid a recession for now, official figures showed on Friday.
The services sector slowed to flat output in the fourth quarter (Q4) of last year driven by falls in the education, transport and storage sub-sectors, and growth of 0.3 percent in construction was offset by a 0.2 percent fall in the production sector, the Office for National Statistics (ONS) said.
After GDP declined in the third quarter, no growth in Q4 meant the economy avoided the most common definition of a recession of two consecutive quarters of declining GDP, according to economist Paul Dales at Capital Economics consultancy.
"But it was mighty close," Dales said, noting that to two decimal places, the economy grew by 0.01 percent in the quarter, and if GDP had been a little lower, then the economy would have contracted and entered a recession.
Monthly GDP is estimated to have fallen by 0.5 percent in December 2022, following an unrevised growth of 0.1 percent in November, the ONS said. The services sector fell by 0.8 percent, and production output grew by 0.3 percent. The construction sector was flat.
In December, public services were hit by fewer operations and general practitioner (GP) visits, partly due to the impact of strikes, as well as notably lower school attendance, ONS Director of Economic Statistics Darren Morgan noted.
Meanwhile, the break in Premier League football for the World Cup and the postal strikes also caused a slowdown, Morgan said, adding that these falls were partially offset by a strong month for lawyers, growth in car sales and the cold snap increasing energy generation.
The UK's annual GDP is estimated to have grown by 4.1 percent in 2022, following the growth of 7.4 percent in 2021.
"Despite recent squeezes on household incomes, restaurants, bars and travel agents had a strong year. Health and education also began to recover from the effects of the (COVID-19) pandemic," Morgan said.
RECESSION STILL LOOMS
Despite the positive news, the UK's economic outlook remained bleak. "We may have avoided a technical recession late last year, but we probably won't avoid one this year," lead economist Ben Jones at the Confederation of British Industry said.
The S&P Global / CIPS Flash UK PMI Composite Output Index registered 47.8 in January, down from 49.0 in December, to remain below the neutral 50.0 threshold for the sixth consecutive month. Moreover, the latest reading signaled the fastest rate of decline since the national lockdown in January 2021.
"Weaker than expected PMI numbers in January underscore the risk of the UK slipping into recession," Chris Williamson, chief business economist at S&P Global Market Intelligence, said.
"Industrial disputes, staff shortages, export losses, the rising cost of living and higher interest rates all meant the rate of economic decline gathered pace again at the start of the year," Williamson added.
UK consumer confidence index in January slid to minus 45 and neared record lows after it touched bottom at minus 49 in September, a survey conducted by the market research company GfK showed.
Consumers have had a New Year hangover -- of the economic kind -- with high levels of pessimism over the state of the wider economy, GfK Client Strategy Director Joe Staton said.
"With inflation continuing to swallow up pay rises, and the prospect of some shocking energy bills landing soon, the forecast for consumer confidence this year is not looking good," he said.
The UK's GDP was expected to decline by 0.1 percent in the first quarter of this year, the Bank of England noted earlier this month, adding that business surveys, such as the S&P Global/CIPS UK flash PMIs, were consistent with small declines in GDP.
"The UK avoided a rapid return to recession last year by the narrowest of margins. But it is not out of the woods yet, and families are still living through a living standards downturn," James Smith, research director at the think tank Resolution Foundation, said.
"The longer-term picture is more worrying, with the UK economy yet to return to its pre-pandemic size having suffered a prolonged period of weak growth since the financial crisis," Smith added.
