Preliminary data published by the Office for National Statistics (ONS) showed that the UK economy stabilized in the 4th quarter, as expected, after shrinking by 0.5% in the 3rd quarter (revised from -0.2%). The figures mean the country narrowly avoided a recession — commonly defined as two quarters of negative growth. The level of quarterly GDP is now 0.8% below its pre-coronavirus level (Quarter 4 2019), while GDP is estimated to have increased by 4.0% in 2022 after increasing by 7.6% in 2021. Last week, the Bank of England predicted that the UK would enter a shallow but prolonged recession that would begin in the first quarter of 2023 and last for five quarters.
The ONS said that the implied price of GDP grew by 1.3% relative to the 3rd quarter, which was primarily driven by higher price pressures for household consumption (1.2%). In annual terms, the implied price of GDP grew by 6.6%. This has been driven by strong rises for the price of household consumption, while there have been large price movements in internationally traded goods and services.
The data also showed that the economy contracted by 0.5% in December, offsetting November's 0.1% increase, and exceeding economists' forecasts (-0.3%). In annual terms, GDP fell by 0.1% after rising by 0.6% in November (revised from +0.2%). Consensus estimates suggested a 0.2% reduction.