"Ultimately it has become a bit of a moot point if we are technically in recession or not – for many these past few months will have been incredibly challenging."
Monthly GDP is estimated to have grown by 0.3% in January, after falling by 0.5% in December 2022, the latest ONS statistics show.
However, looking at the broader picture, GDP was flat in the three months to January 2023 and industry experts have warned that the threat of a recession in 2023 is 'far from over'.
The services sector grew by 0.5% in January, after falling by 0.8% in December, with the largest contributions to growth coming from education, transport and storage, human health activities, and arts and entertainment, all of which have rebounded after falls in December.
Output in consumer-facing services grew by 0.3% after a fall of 1.2% in December.
However, production output fell by 0.3% following growth of 0.3% in December, while the construction sector fell by 1.7% in January after being flat in December.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, commented: “The UK’s economy rose 0.3% in January, as services returned to growth – including arts and entertainment. Household spending has been holding up much better than expected despite soaring inflation, and this is propping services up. However, in the three months to January, GDP was flat and the construction sector is facing reasonably sharp contractions. This tallies with the idea that the UK economy is going to shrink overall this year, even if a technical recession is avoided."
Richard Carter, head of fixed interest research at Quilter Cheviot, added: “The UK may have avoided recession at the end of 2022, but the threat of one remains far from over, as evidenced by today’s GDP figures. The economy made a tentative return to growth – up 0.3% in January - despite many expecting a more stuttering start, though growth was flat in the three months to January. Ultimately it has become a bit of a moot point if we are technically in recession or not – for many these past few months will have been incredibly challenging.
“The doom and gloom is certainly not as bad as it was at the end of 2022, but similar challenges remain. Central Banks have been keen to stress that talk of any pauses in rate moves, or even cuts, is far too premature. Inflation is proving a difficult beast to tame and as such further rate rises may be required. Ultimately, this is going to weigh on the economy and the Bank of England continues to have a tough job of balancing its job of getting inflation down without tipping the economy into an even worse recession.
“And this brings us on to the Budget next week. Backbench Conservatives are desperate to see something that will stimulate the economy and boost growth, but they are likely to be disappointed. The Chancellor has made it clear that slow and steady is the best way to bring down inflation and get the economy moving again. However, if inflation comes down as quickly as is expected and growth fails to materialise, questions will be asked about how we solve the economic malaise facing the UK.”
