UK falls into technical recession after economy shrinks again – business live | Business

Liz McKeown, the ONS director of economic statistics, says manufacturing, construction and the wholesale industry were the biggest drags on growth in the fourth quarter of 2023.

McKeown explains:

“Our initial estimate shows the UK economy contracted in the fourth quarter of 2023. While it has now shrunk for two consecutive quarters, across 2023 as a whole the economy has been broadly flat.

“All the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth, partially offset by increases in hotels and rentals of vehicles and machinery.

“The latest data showed that health and education performed less well than initially estimated in both October and November. Early indications suggest they both contracted in December. Retail and wholesale were the biggest overall downwards pulls on the economy in December, partially offset by growth in computer programming and manufacturing.”

While the economy has now decreased for two consecutive quarters, across 2023, GDP is estimated to have increased by 0.1% compared with 2022, the ONS says.

Newsflash: Britain has fallen into a technical recession.

Around a year on from Rishi Sunak’s pledge to “grow the economy”, data just released by the Office for National Statistics shows that it contracted in the final three months of 2023.

UK GDP fell by 0.3% in the October-December quarter, the ONS says, a larger fall than expected.

That follows a 0.1% drop in GDP in July-September, meaning the UK has contracted for two quarters in a row — the standard definition of a technical recession (details here).

It’s the UK’s first recession since 2020, early in the pandemic.

In December alone, the economy shrank by 0.1%.

Overnight, Japan has unexpectedly fallen into a recession after its economy shrank for two quarters in a row, new data shows.

Japan’s real GDP – the total value of goods and services – shrank by 0.1% in the last three months of 2023 compared to the previous quarter, due to weak spending by households and businesses, according to the cabinet office.

Growth for the previous quarter was also revised downward to -0.8%, meaning that Japan is in a technical recession (two quarterly falls in GDP in a row).

It has also lost its crown as the world’s third-largest economy, to Germany.

Japan’s economy, now the world’s fourth-biggest, grew 1.9% in 2023 in nominal terms – meaning it is not adjusted for inflation – but in dollar terms its gross domestic product (GDP) stood at $4.2tn compared with $4.5tn for Germany.

Shadow chancellor Rachel Reeves is promising to put economic security first, should Labour win the next election.

In a party political broadcast released ahead of today’s GDP report, Reeves says:

“I spent my career at the Bank of England and in business before entering politics.

I know what it takes to run a successful economy. Because only by building a stronger economy can we rebuild as a stronger nation.”

Reeves is also promising “change built on the rock of fiscal responsibility and iron discipline”, a week after Labour slashed its green investment plans, and blamed the u-turn on Tory ‘recklessness’.

Good morning.

We’re about to learn how the UK economy fared in the final three months of last year, and whether it fell into a technical recession.

The Office for National Statistics is due to report fourth-quarter GDP data at 7am this morning, as well as growth data for December alone.

City economists predict they will show the economy shrank slightly in October-December, with GDP expected to have dropped by 0.1%.

If so, that would be the second quarterly contraction in a row – as GDP fell by 0.1% in July-September, meeting the “rule-of-thumb” definition of a technical recession.

GDP fell by 0.1% in July-September, so this would be a shallow recession, as these things go, certainly compared to the plunge in activity early in the Covid-19 pandemic.

But even so, headlines declaring “Britain in recession” would surely be politically damaging, on a morning when voters in the constituencies of Wellingborough and Kingswood head to the polls in crunch by-elections.

On the other hand – if the UK avoids recession, even by a whisker, it could be a boost to the struggling Tories.

Sanjay Raja, chief UK economist at Deutsche Bank, says:

Having walked a fine line between stagnation and recession for some time, we think the UK economy will have likely slipped into a marginal technical recession in the second half of 2023 – the first since the onset of the pandemic.

Our models point to a 0.1% q-o-q contraction, driven in large part by falls in consumer spending and business investment.

As things stand, previous data has shown that monthly GDP fell by 0.3% in October, as all sectors of the economy contracted. But the economy then rallied in November, with 0.3% growth, driven by the services sector.

Economists predict a 0.2% fall in GDP in December….

The agenda

• 7am GMT: UK GDP report for Q4 2023

• 7am GMT: UK trade report for Q4 2023

• 10am GMT: Eurozone trade balance for December

• 1pm GMT: Bank of England policymaker Megan Greene holds fireside chat with Brian Coulton, chief economist at Fitch Ratings

• 1.30pm GMT: US weekly jobless data