UK enters technical recession as economy shrinks 0.3% in Q4 2023
The 0.3% fall in Q4 was fuelled by decreases in all three main sectors: 0.2% in services, 1% in production and 1.3% in construction output, the ONS said.
A technical recession happens when gross domestic product (GDP) contracts for two consecutive quarters, as GDP fell 0.1% in the third quarter of last year.
'More questions than answers' as inflation remains unchanged at 4%
However, the ONS noted that, despite the two consecutive contractions, GDP is estimated to have risen by 0.1% in 2023 compared with 2022, the «weakest change in real GDP since the financial crisis in 2009».
The 0.3% fall in Q4 was fuelled by decreases in all three main sectors: 0.2% in services, 1% in production and 1.3% in construction output, the agency said.
Similarly, there were falls in the volume of net trade, household spending and government consumption over the three-month period, which were partly offset by an increase in gross capital formation.
Between Q3 and Q4, the ONS estimated the UK economy contracted by a cumulative 0.5%; whereas, compared with Q4 2022, real GDP is estimated to have fallen by 0.2%.
However, several professionals argued the economic downturn is expected to be «short and shallow» with «brighter times» lying ahead.
Jeremy Batstone-Carr, European strategist at Raymond James Investment Services, said while there is an «impression of economic stagnation, brighter times surely lie ahead», as he argued the lagged effects of high interest rates will work their way through the economy and «inflationary pressures will settle».
This should allow the Bank of England to lower its base rate «come summertime», he said.
UK wage growth defies forecasts but slows to lowest level in more than a year
Marcus Brookes, CIO at Quilter
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