Image Source: Economic Times
Official numbers show that the UK economy grew in November, a surprise. But, of course, the World Cup helped with this.
Gross domestic product (GDP), a key economic indicator that includes output from services, construction, and manufacturing, went up by 0.1% in the UK.
The Office of National Statistics (ONS) said pubs and restaurants helped growth because people went out to watch football.
But since October, growth has slowed down a lot. This is partly because of strikes.
In November, workers on the rails and at Royal Mail went on strike. The ONS’s director of economic statistics, Darren Morgan, told the BBC’s Today program, “We saw the effects of industrial action in today’s numbers.
In December, there were more strikes involving both NHS workers and Border Force workers at six UK airports.
Even though things improved in November, it is still being determined if the UK will stay out of a recession this year. The main reason for the 0.5% growth in October was that businesses opened again after closing for Queen Elizabeth II’s funeral in September.
A recession occurs when the economy shrinks for two straight three-month periods or quarters.
The UK economy lost 0.3% of what it made from July to September.
The UK is still dealing with the fastest rate of price increases, or inflation, in 40 years. This is mostly due to rising energy costs. Since December 2021, the Bank of England has said it will raise interest rates several times to slow down consumer demand and keep prices from going up too much.
Jeremy Hunt, the Chancellor, said, “We have a clear plan to cut inflation in half this year. Inflation is a sneaky hidden tax that has caused interest rates and mortgage costs to go up and has slowed growth globally.”
Between September and November, GDP fell by 0.3%, according to the ONS. This was mostly because of the extra bank holiday for the state funeral in September.
Rachel Reeves, the shadow chancellor, said, “Families already struggling with the rising cost of living will be very worried by the news of more economic pain.”
After November’s slightly better-than-expected numbers, Pantheon Macroeconomics said, “It is still too early to say if the UK economy is already in recession.”
Mr. Morgan of the ONS said that for the UK to go into a slowdown, the economy would have to shrink by 0.6% in December.
He said that one in six businesses had told the ONS that “industrial action” had hurt them, so “we would have to see in a few weeks how the effects of industrial action affect our December figure.”
Pantheon said that the GDP could drop significantly in December because “all the major business surveys point to falling production” and “heavy snowfall and, to a lesser extent, rail strikes likely slowed down activity for a while.”
In November, the manufacturing sector shrank, and the construction sector stayed the same, but the services sector grew. The services sector comprises many different industries, from hospitality to accounting.
Mr. Morgan said, “Employment agencies did pretty well. This may be because businesses are looking for help to fill job openings, which we know has been a problem in some sectors based on our labor market data.”
The ONS also said there was “anecdotal evidence” that the Fifa World Cup had helped some businesses, like pubs, restaurants, wine sales, and pizza delivery orders.
Even though it was a surprise that the economy grew in November, the long-term trend is still down. So overall, the UK economy still looks weak, but we will know if it’s in a recession until the next set of numbers comes out in a month.
Pubs, pizza delivery, and the advertising business all did better because of the World Cup, which helped the economy more than usual. But a number of last year’s monthly numbers were changed to be lower, so the less volatile three-month measure is going down. Strikes were partly to blame for the 4.7% and 3.1% drops in transportation and postal services, respectively.
So, a mix of new and one-time factors and changes to statistics mean that the Bank of England will probably still raise rates again next month when it does its most thorough look at the state of the economy.
The UK economy shrank before now
Revised numbers show that the UK economy shrank more than predicted in the three months leading up to September.
The ONS said that business investment did worse than first thought, which is why the economy shrank by 0.3% instead of 0.2% as was first thought.
Changes have also been made to the growth numbers for the first half of 2022.
The UK is predicted to go into recession in the Q3 of the year 2022 because rising prices will hurt growth.
Read Also: Recession warning sounds from World Bank
When a country’s economy shrinks for two consecutive three-month periods, or “quarters,” it is said to be in recession. This is because companies usually make less money, pay decreases, and unemployment increases. This means the government needs more tax money to spend on public services.
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