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UK GDP for Q4 Confirms Technical Recession in H2 2024

The UK economy slipped into a mild technical recession during the latter half of 2023, as revealed by the latest figures from the Office for National Statistics (ONS) on Thursday. The Gross Domestic Product (GDP) saw a 0.3% contraction in the fourth quarter, exceeding the 0.1% decline predicted by analysts. This downturn succeeded an unadjusted 0.1% drop in the previous quarter, marking two consecutive quarters of contraction.

Despite achieving a slight 0.1% growth overall for the year, this pace marks the slowest annual expansion observed in the UK since 2009, excluding the initial year of the pandemic.

The economic downturn in the final quarter was widespread, with declines recorded across all three major sectors: services fell by 0.2%, production by 1%, and construction by 1.3%. This broad-based contraction was further compounded by decreases in household spending, government outlays, and trade.

Nonetheless, a glimmer of hope was noted in business investment, which rebounded with a 1.5% increase following a 2.8% decrease in the third quarter. Over the entire year, business investment experienced a 6.1% rise.

Our Take: The GDP figures for the UK are consistent with other data indicating that economic growth outside the US was notably subdued in the second half of 2023. However, there has been a pickup in momentum since then, and we anticipate a stronger cyclical recovery in 2024. Given that the technical recession was anticipated, it does not significantly shift the outlook for the Bank of England (BoE). A rate cut before the summer remains improbable.


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