UK Recession 'can Still Be Avoided' As GDP Grows 0.2% In Q2

The ONS also adjusted figures for Q1, resulting in an uplift to the original estimate of 0.1%, to 0.3%.

Growth in Q2 was largely driven by a 1.2% increase in the production sector, experiencing rises in nine out of its 13 sub-sectors, while also reflecting falling input prices across the three-month period relieving pressure on manufacturers.

eToro: Recession becomes top concern for UK retail investors

Chancellor of the Exchequer Jeremy Hunt said the ONS data published today (29 September) proved the doubters wrong about the UK economy's ability to recover from Covid-19.

"We were among the fastest countries in the G7 to recover from the pandemic and, since 2020, we have grown faster than France and Germany. The best way to continue this growth is to stick to our plan to halve inflation this year, with the IMF forecasting that we will grow more than Germany, France and Italy in the longer term," Hunt added.

Richard Carter, head of fixed interest research at Quilter Cheviot, said the GDP quarterly accounts "give some hope that a recession can still be avoided by the UK", at least in 2023.

He also noted the ONS' revision of Q1 GDP data meant that, although challenging, economic growth "is not quite non-existent for the UK".

Cater continued: "We are also seeing shoots that the cost of living crisis may be easing for households. While expenses are still elevated compared to pre-pandemic periods, disposable incomes are beginning to move ahead, bringing relief to many households who will have struggled over the winter months and where excess savings from the pandemic have dried up.

"However, given the speed of interest rate rises and the cumulative effect of the cost of living crisis, it may just be a case of the pain being delayed, with 2024 looking more challenging. The BoE has an incredibly difficult job to do, and with next year likely to see a general election at the same time, they will not want to overcorrect and tip the balance of power one way or another."

Peterson Institute: UK economy to decline in 2023 and 2024 as US and eurozone grow

Yet economic headwinds will still be felt by consumers as interest rates are set to remain higher for longer, he argued: "The economy may be holding up just now, but it is asking a lot for to continue to do so for quite so long."

Charles Hepworth, investment director at GAM Investments, also highlighted the impact that strikes over the last 18 months have had on the British economy, arguing that "growth in the economy is still at the mercy of strike action".

He added it is "undeniable" the ONS data translate into a "slightly better outlook for the UK economy than many had feared", but he also asked whether the economic resilience may boost the Conservative party ahead of next year's general election: "On current polling, it would suggest not."

RECENT NEWS

The Penny Drops: Understanding The Complex World Of Small Stock Machinations

Micro-cap stocks, often overlooked by mainstream investors, have recently garnered significant attention due to rising c... Read more

Current Economic Indicators And Consumer Behavior

Consumer spending is a crucial driver of economic growth, accounting for a significant portion of the US GDP. Recently, ... Read more

Skepticism Surrounds Trump's Dollar Devaluation Proposal

Investors and analysts remain skeptical of former President Trump's dollar devaluation plan, citing tax cuts and tariffs... Read more

Financial Markets In Flux After Biden's Exit From Presidential Race

Re-evaluation of ‘Trump trades’ leads to market volatility and strategic shifts.The unexpected withdrawal of Joe Bid... Read more

British Pound Poised For Continued Gains As Wall Street Banks Increase Bets

The British pound is poised for continued gains, with Wall Street banks increasing their bets on sterling's strength. Th... Read more

China's PBoC Cuts Short-Term Rates To Stimulate Economy

In a move to support economic growth, the People's Bank of China (PBoC) has cut its main short-term policy rate for the ... Read more