"On a three-monthly basis, the UK still shrank, and a 0.1% gain on a monthly basis smells heavily of stagnation, rather than real growth."
Monthly GDP is estimated to have grown by 0.1% in November, following growth of 0.5% in October, the latest ONS statistics show.
This means the UK is likely to have narrowly avoided a recession in 2022, with November's growth boosted by consumer spending during the World Cup.
Looking at the broader picture, GDP fell by 0.3% in the three months to November 2022.
The services sector grew by 0.2% in November, after growth of 0.7% in October.
Output in consumer-facing services grew by 0.4%, following growth of 1.5% in October; the largest contribution to growth came from food and beverage service activities in a month where the FIFA World Cup started.
Production output decreased by 0.2% and the construction sector was flat after growth of 0.4% in October.
Marcus Brookes, chief investment officer at Quilter Investors, said: “Following the slight bounce back seen in October, this morning’s data shows UK GDP unexpectedly grew by 0.1% in November. However, in the three months to November GDP fell by 0.3%, edging the UK closer to an official recession.
“Despite government support with energy bills and a reasonably mild winter thus far which should have supported people’s ability to spend, high inflation and rising everyday costs continue to have a significant impact on the economy. For the Bank of England, inflation remains the biggest scourge and as such we can expect it to continue to increase its base rate in the face of a recession – albeit there are growing calls to slow the pace of these hikes and for a pivot sooner rather than later.
“While Rishi Sunak vowed to see inflation halved in 2023, this will be a gradual process as opposed to a rapid decline. Given the combination of rising mortgage costs, higher energy bills and still high inflation, the coming months are likely to be challenging for everyone including government, businesses and households.
“Chancellor Jeremy Hunt announced that the UK had entered a recession during his Autumn Statement, and this morning’s data does little to alleviate these concerns. December’s reading is expected to confirm what already is known, but only time will tell just how long and how deep the recession will be.”
George Lagarias, chief economist at Mazars, commented: “UK GDP grew for the second straight month, defying expectations. While a part can be attributed to increased activity related to the world cup, overall, the picture is one of otherwise healthy growth in the services sector. We should not, however, perform a victory lap for the UK economy just yet. The wider picture is that macroeconomic variables have become increasingly unpredictable. We see this trend continuing and possibly exacerbating over the foreseeable future. The global economy remains significantly unbalanced, consumption patterns are disrupted, and we expect larger oscillations in growth and inflation than in the past. This could leave forecasters confused for some time, especially if they are heavily reliant on quantitative models.”
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, added: “Monthly UK GDP is estimated to have grown by 0.1% in November, which is better than expected. Growth came primarily from the services sector, with other areas struggling. While this data set offers some positivity, the broader picture still poses challenges. On a three-monthly basis, the UK still shrank, and a 0.1% gain on a monthly basis smells heavily of stagnation, rather than real growth. The idea that the UK will formally enter a recession soon is still very much a likelihood. The boost in November could stem from extra spending in the economy in the run up to Christmas, and there’s real risk now that consumers are going to tighten their belts. As people’s incomes come under such pressure because of inflation, and businesses grapple with the January slump, the amount of economic activity taking place is likely to reduce from here. Policymakers are keen to see heat taken out the economy because this will help to bring inflation down, which will eventually end the continuous rise in interest rates. Ultimately, it’s nice to see the UK squeeze out half an ounce of economic growth, but very real challenges persist."
