The UK avoided the recession.

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

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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