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The UK avoided the recession.

 The UK eco­nomy stag­nated in the final quarter of 2022, nar­rowly avoid­ing a reces­sion des­pite out­put

Index

shrink­ing by more than expec­ted in Decem­ber. That was in line with ana­lysts’ expect­a­tions but was weaker than the 0.1 per cent expan­sion expec­ted by the Bank of Eng­land. The flat read­ing means the UK avoided a tech­nical reces­sion, usu­ally defined as two con­sec­ut­ive quar­ters of fall­ing out­put. The quarterly fig­ure was boos­ted by growth in Octo­ber and Novem­ber when out­put was sup­por­ted by the rebound after the extra bank hol­i­day in Septem­ber and spend­ing for the World Cup.

However, the eco­nomy shrank 0.5 per cent dur­ing Decem­ber, worse than the 0.3 per cent con­trac­tion fore­cast by eco­nom­ists polled by Reu­ters. In the fourth quarter, the UK eco­nomy was still 0.8 per cent below the level in 2019, before the pan­demic. In con­trast, the US eco­nomy was up 5.1 per cent over the same period, and out­put in the euro­zone grew 2.4 per cent. The UK is the only G7 eco­nomy not to have regained the ground lost dur­ing the health crisis.

The BoE expects the eco­nomy to con­tract this year and in the first quarter of next year as high energy prices and higher bor­row­ing costs weigh on spend­ing. Out­put will not recover to its pre­pan­demic levels until 2026, accord­ing to its cal­cu­la­tions. «The reces­sion has just been delayed rather than can­celled». The BoE now­ex­pects ashal­lower reces­sion than it fore­cast in Novem­ber.

Real con­sumer spend­ing mar­gin­ally increased, and busi­ness invest­ment rose 4.8 per cent. Gov­ern­ment spend­ing rose 0.8 per cent.

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