Amidst a Black Friday spending spree, the UK economy notched a 0.3% growth in November, propelled by resilient consumer spending, though concerns linger over the broader economic outlook and the looming possibility of a technical recession in 2023. Here’s the full story.
Two Steps Forward, One Step Back
The UK economy had some surprisingly good news recently with a rebound recorded in November, marking 0.3% growth after a 0.3% decline in October. The Office for National Statistics (ONS) reported that his uptick in fortune was primarily fuelled by a splurge of consumer spending during Black Friday sales, kicking off a healthy period of sales for the festive season.
Black Friday, America’s capitalist gift to the rest of the world in which retailers offer massive one day reductions in price, played an outsized role in revitalizing the UK economy.
Consumers, lured by the promise of massive savings and blink and you’ll miss it promotions, flocked to retailers, breathing life into an economy previously relying heavily on life support.
Grant Fitzner, the ONS chief economist, emphasized the impact of the consumer spending splurge, particularly within the services sector, stating, “The longer-term picture remains one of an economy that has shown little growth over the last year.”
Services Sector Dominance
One of the only remaining well performing sectors of the UK economy, the services sector, was the main contributor to the November growth figures. Retail, car leasing and video game companies, in which the UK has an outsized role, all experienced a solid month.
The ONS reported a 0.3% growth in services output, effectively overturning the fall witnessed in October. The resilience of this sector helped an economy otherwise staggering towards prolonged stagnation.
Whilst the services sector did most of the heavy lifting for the figures, the production output, made up of energy generation and manufacturing, also bounced back after a brief slump. The revival in production output further entrenched the economic bounceback experienced in November.
However, the construction sector was not so lucky, as it experienced a 0/2% decline in activity, showing not all sectors of the economy got to bask in the sunlight of economic growth.
Cost of Living Crisis
Despite the good news outlined in the figures for November, many economists cautioned against unwarranted optimism. Across the extended three-month period concluding in November, there was an estimated 0.2% contraction in GDP, revealing the serious strain placed upon households in the midst of the ongoing cost of living crisis.
This downturn in economic output reflects the serious challenges faced by individuals and families grappling with the financial burdens imposed by the stalling British economy.
Recent figures showed the success of some of the UK’s largest retailers during the Christmas shopping season. A massive surge in online orders and the predictable demand for festive food and drink kept retail sales afloat, which helped to compensate for considerably less interest in larger purchases such as furniture or electrical goods.
Despite the positive growth in November, the broader three-month period until the end of November saw an estimated 0.2% decline in GDP.
Yael Selfin, chief economist at KPMG UK, attributes this dip to the prevailing cost of living crisis, exerting pressure on households. As inflation figures are anticipated to cool in November, households continue to grapple with elevated prices, raising concerns about the as yet remote possibility of economic recovery.
“Even if the economy manages to avoid a recession, it is expected to remain in stagnation territory,” stated Selfin.
Potential Recession on the Horizon
Yael Selfin’s assessment of the overall economic outlook remains gloomy, with the looming possibility of a technical recession in the latter half of 2023. Even if a recession is averted, stagnation seems inevitable, presenting policymakers with a formidable challenge.
The potential for a downturn has prompted speculation about the Bank of England’s response, with expectations mounting for interest rate cuts to counterbalance falling inflation.
Chancellor Jeremy Hunt welcomed the growth witnessed in November but tempered any optimism with a cautionary note, acknowledging that the pace of growth will likely remain sluggish as inflation recedes.
“We have seen that advanced economies with lower taxes have grown more rapidly, so our tax cuts for businesses and workers put the UK in a strong position for growth into the future,” Hunt stated.
Uncertain Future
The November spending splurge, fuelled by Black Friday spending, may have breathed some life into a UK economy limping along, battered by countless outside and internal forces. However, the good economic news could be seen as a glimmer of hope amidst consistent and prevailing challenges.
As the trajectory of the UK economy remains uncertain, policymakers are left with the daunting task of trying to improve the economic figures, as well as lessening the ongoing cost of living crisis, before the election expected later this year.
The post The UK Economy’s Experiences November Bounceback Driven by Black Friday Boost first appeared on Edge Media.
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