The economy of the UK avoided a recession by growing in the final months of 2022, according to official data that showed an increase in household finances from state energy bill subsidies, but a drop in business investment.
With the economy still hampered by high inflation and concerns about weak growth prospects, Gross Domestic Product (GDP) increased by 0.1% between October and December, after a preliminary estimate of stagnation.
GDP in the third quarter was also revised to show a contraction of 0.1%, a smaller drop than initially thought, the Agency for National Statistics said on Friday.
Two consecutive quarters of contraction would have represented a recession.
Despite the improvement, British economic output remained 0.6% below its end-2019 level, the only G7 economy that has not recovered from the Covid-19 pandemic.
“The latest release takes the UK a little further out of the recession danger zone, although it does not change the general picture that the economy performed poorly in the second half of 2022, when the cost of the living crisis took hold,” he said. Philip Shaw, an economist at Investec.
The UK’s dominant services sector rose by 0.1%, driven by an almost 11% jump for travel agents, echoing other data that pointed to a rise in holiday demand.
The industry grew by 0.5%, driven by the erratic pharmaceutical sector, and construction expanded by 1.3%.
Private savings were boosted by the government’s support scheme for energy bills and household disposable income increased by 1.3% after four consecutive quarters of negative rates.
But the data suggests companies have remained cautious. Business investment fell 0.2% quarter-on-quarter, a sharp downward revision from the first estimate of a 4.8% rise following changes to the way the statistics bureau calculates seasonal adjustments.
