The UK economy slipped into a recession in the final quarter of 2023. This marks two straight quarters of economic contraction, according to initial figures from the Office for National Statistics (ONS) shown Thursday.
Gross domestic product (GDP) depleted by 0.3% in the October–December period. It is a steeper decline than the 0.1% consensus forecast by economists. The dip follows a 0.1% contraction in Q3, meeting the common definition of a technical recession.
All three main sectors of the British economy, including services, production, and construction, saw declines in output in Q4. The services sector contracted by 0.2%. Production fell by 1%, while construction output was down 1.3%.
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UK GDP grew by just 0.1% in 2023
For the whole of 2023, GDP grew by just 0.1%. In December, output declined by 0.1% month-on-month.
Persistently high inflation was singled out as the biggest drag on growth by U.K. Finance Minister Jeremy Hunt. UK inflation remains firmly above the Bank of England’s 2% target. This has forced the central bank to keep interest rates elevated, dampening economic activity.
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With inflation projected to continue falling, potentially easing cost pressures on households, Marcus Brookes, chief investment officer at Quilter Investors, expects the consumer-driven economy to rebound over the coming months.
So while risks undoubtedly remain in the form of inflation and weak activity, the dip into a technical recession appears to be minor. With key drivers poised to rebound, the U.K. economy looks set for a muted recovery this year.