UK avoids recession - but will anyone notice?

UK avoids recession – but will anyone notice?

The Chancellor warned that “we are not off the hook” despite new figures showing the UK narrowly avoided falling into recession in 2022.

The economy stabilized in the last three months of last year, after falling 0.3% between July and September, meaning the UK is not technically in recession – which is defined as two consecutive quarters of economic decline.

“The fact that the UK was the fastest growing economy in the G7 last year, in addition to avoiding a recession, shows that our economy is more resilient than many feared,” said Jeremy Hunt.

However, economists and commentators have warned that the outlook remains bleak and that while the UK has not yet entered recession, many will still feel it has.

What were the newspapers saying?

Britain avoided a recession ‘in the least glamorous way possible’, Kate Andrews wrote for The viewerfor “it is not a story of growth, but a story of stagnation, which has kept the dreaded label of ‘recession’ at bay”.

There is “no guarantee that people will feel better”, she added, because “with real wages taking such a hit, many will feel like we are in a recession anyway”.

“Whether we’re ‘technically’ in a recession isn’t really that important,” said policy‘s London Playbook, because “where such small changes are involved, a plus sign is not a conveyor belt of milk and honey, any more than a minus sign is Armageddon”.

The National Institute for Economic and Social Research told the bulletin that “this year will look like a recession to many, regardless of the data.” He added that “focusing on the economic crisis facing the bulk of the British population, rather than the technicalities, provides a more insightful perspective.”

Political economist Richard Murphy agreed. “Who cares if we’re not in a technical recession if millions of people can’t make ends meet, heat their homes, pay the rent or the mortgage, and feed their children? he asked about Twitter.

Reuters put the data in a global context, noting that UK output in the fourth quarter was still 0.8% below its pre-pandemic level, “in stark contrast to other major advanced economies which are now in the above their pre-pandemic size.”

Despite the good news of an averted recession, AM City noted that markets were not supported: the FTSE100 index was trading slightly lower, down 0.24% this morning.

After that ?

The Bank of England still expects a recession to occur in 2023, but believes the period of negative economic growth will be shallow and shorter than expected.

Most analysts agree. Paul Dales, chief UK economist at Capital Economics, told the evening standard“As the brakes of high inflation and high interest rates are very important, we still believe that the economy will enter a recession this year.”

And Jeremy Batstone-Carr of Raymond James Investment Services told the Daily Express that “we are still in the recession which so far has been barely contained”.

Although “there is greater hope that a downturn will never materialize at all or that it will be less profound or much more short-lived than initially feared,” said Alice Haine, analyst for personal finance at Bestinvest. The sunthe economy is “not out of the woods yet”.

A “softer recession” would mean that “unemployment increases more slowly, wage growth remains strong and nationally generated inflation declines at a slower pace than expected,” said Thomas Pugh, economist at RSM UK. It’s money.

However, he added, this could in turn be bad news for landlords as it “could result in the Bank of England rate increase more than planned “.

Rather than the economy going into a recession, it could just stay flat, one expert argued. Instead of “doing the time shift and preparing for a return to recession in the 1970s, triggered by energy shocks, runaway inflation and industrial strife”, Susannah Streeter, head of currency and markets at Hargreaves Lansdown , told the Daily mail“we could be heading towards an early 2000s style period stagnation”.

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