Can the UK Swerve Recession?

Gross domestic product grew by 0.3% in January, according to an ONS estimate, having shrunk by 0.5% in December

Alliance News 10 March, 2023 | 9:32AM
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Canary Wharf in London

The UK economy grew slightly faster than expected at the beginning of 2023, according to the Office for National Statistics on Friday.

Gross domestic product grew by 0.3% in January, according to an ONS estimate, having shrunk by 0.5% in December.

FXStreet-cited market consensus had expected a 0.1% rise in GDP.

"Looking at the broader picture, GDP was flat in the three months to January 2023 when compared with the three months to October 2022," ONS said.

The growth was led by the services sector, which grew by 0.5% during January, after a 0.8% fall in December.

"The largest contributions to growth in January 2023 [came] from education, transport and storage, human health activities, and arts, entertainment and recreation activities, all of which have rebounded after falls in December," the statistical body explained.

The construction sector contracted by 1.7% in January, having been flat in December. Production output fell by 0.3%, having risen 0.3% the month before.

"Monthly GDP was broadly flat in January 2023 compared with the same month last year. For comparison, monthly GDP fell by 0.1% between December 2021 and December 2022," ONS added.

Some Fund Manager Reaction

Luke Newman, portfolio manager at Janus Henderson Investors:

“January GDP provided another more positive than expected data point for the UK economy which makes a technical recession unlikely at least in the first half of the year. Despite the ongoing industrial action and when faced with high prices, consumer retail activity is again stronger than many anticipated, with the economy proving resilient in the face of these disruptions. Clear challenges still remain for the domestic economy, but with corporate investment recovering in many sectors and some easing in the extreme levels of inflation likely over the coming months, any downturn is likely to be shallower and shorter than the worst-case scenarios feared last year.

Neil Birrell, chief investment officer at Premier Miton Investors, said:

“The UK economy bounced back a little in January, showing more growth than expected. In most regions of the world the economic data is ambiguous, but it does look like policy is not having the desired effect of dampening activity as much as the central banks would like and that includes the UK. This number raises hopes that a protracted recession can be avoided, but increases fears that rates will be higher for longer.”

Derrick Dunne, chief executive of YOU Asset Management, said:

“UK GDP expanded by 0.3% in January, driven by a rebound across the services sector.

“While this stronger-than-expected growth will likely create some temporary waves for the pound, the ONS reported that growth was flat in the three months leading to January, and this was largely down to the stark 0.5% decline we saw in December.

“Though a recession is not off the table, the Bank of England continues to stress that this would be relatively shallow and short-lived."






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