This morning, the United Kingdom’s Office for National Statics (ONS) released its latest GDP growth figures for December 2023.
The figures have been highly anticipated for their chance to show whether or not the UK had entered into a technical recession or not in the last month of 2023.
The GDP figures
According to the ONS, Real gross domestic product (GDP) is estimated to have fallen by 0.3% in the three months to December 2023, compared with the three months to September 2023.
This is a significant decline on the former statistics released on January 12th, which revealed that the UK’s real gross domestic product (GDP) is estimated to have fallen by 0.2% in the three months to November 2023, compared with the three months to August 2023.
However, monthly GDP was estimated to have grown by 0.3% in November 2023, following an unrevised fall of 0.3% in October 2023.
The chances of a UK recession 2024
A recession is a slippery economic term, in that it has to be declared by that country’s government, central bank or other spokespeople in order to be considered ‘official’. However, a technical recession – which is defined by two or more consecutive quarters of contraction instead of growth (i.e. negative GDP figures) has been entirely possible for the United Kingdom.
And with 2023’s Q3 having been officially confirmed as having fallen by 0.1% by the ONS, all the UK was waiting for was December’s GDP data in order to conclude whether or not Q4 was a step up or a step down in terms of growth for the economy.
We now have confirmation of two consecutive quarters of shrinking economic growth – and, what’s more, the degree of contraction has significantly worsened between Q3 and Q4 of 2023, in spite of December traditionally being a time of increased spending.
The more pronounced a technical recession is, the more likely it is that a country will declare that it is in recession.
What the analysts think
However, Pepperstone Group’s analyst Michael Brown said that it wasn’t all doom and gloom when speaking to Invezz on the GDP figures this morning:
A downside surprise on this morning’s UK GDP figures [confirmed] that the economy entered a technical recession as last year drew to a close. However, such recession is likely to be relatively shallow, and short-lived, particularly with the most recent PMI surveys having shown that economic activity has begun to pick-up at the start of 2024. More broadly, the data will do little to alter the broader, and long-running narrative of UK economic growth remaining incredibly sluggish, nor will it do especially much to alter the BoE’s policy outlook, hence the lack of any significant reaction in the GBP, though the data will make for some rather ugly headlines for politicians to grapple with, as elections loom later this year.”