Economic data released this morning show that the UK economy grew 0.1% in November, beating analyst forecasts for a 0.3% contraction. However, growth slowed from 0.5% in October, while the numbers also show that in the three months from September to November the economy still contracted by 0.3%.
Industrial and manufacturing production fell sharply into contraction territory on a monthly basis, dragged down by the manufacture of pharmaceuticals, chemicals and chemical products, though car production rose for the third month in a row.
The continued wind-down of NHS Test and Trace and the vaccine program also weighed on economic activity.
Services performed better, helped by pubs and bars as people watched the World Cup. Tour operators and reservation services were also positive contributors with gains of 3.7% as people booked holidays for next year.
One of the biggest drags on services was transportation as strike activity increased. But as we saw in some of the recent trading updates from retailers, this translated into consumer activity being directed towards other areas, as people collected their items rather than having them delivered.
Could December nick a late winner?
The World Cup continued until 18 December, so the November boost is likely to have continued into mid-December, or at least until England’s exit on 10 December.
Does this raise the possibility of a quarterly expansion in Q4 when we get the December numbers in a month's time? No, according to the Office for Budget Responsibility, which says that the UK economy is already in recession. However, as is often the case, could they be wrong?
It’s likely to be a close-run thing. With the September decline of 0.8% set to drop out of the rolling three-month figures when the December data are released next month, the UK might avoid a technical recession, especially if this week’s positive retail updates are any indication. That said, any growth is likely to be pretty anaemic, and 2023 is still likely to be very challenging.
Nonetheless, today’s numbers do offer some hope that the UK economy may be more resilient than first feared. That could give the Bank of England slightly more flexibility when it comes to its interest rate policy.