UK economy rebounds in Oct, but recession still looms


London, Dec 13

The British economy is estimated to have grown by 0.5 per cent between September and October, statistics showed, but a lengthy recession is still expected in the UK.

October's rebound followed a fall of 0.6 per cent in September, which was affected by the extra bank holiday for the funeral of Queen Elizabeth II, Xinhua news agency quoted the Office for National Statistics (ONS) as saying on Monday.

Car sales rebounded after a very poor September, while the health sector also saw a strong month, said ONS director of economic statistics Darren Morgan.

Meanwhile, construction continued its strong trend over the last year and stands at its highest level on record, with new housebuilding driving growth, he added.

At least 0.3 percentage points of the rise was due to a return to the normal number of working days in October after September's bank holiday, making the economy look stronger than it really is, said Ruth Gregory, senior UK economist at Capital Economics consultancy.

However, aside from this factor, the country's gross domestic product (GDP) probably rose by 0.2 per cent month on month, so it appears that GDP growth had more momentum at the start of the fourth quarter than previously thought, Gregory added.

Despite the monthly rebound, concerns mounted. Looking at the broader picture, the UK's GDP fell by 0.3 per cent in the three months to October compared with the three months to July. A decline was also seen across services and manufacturing, Morgan noted.

"The trend still is downward sloping," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics consultancy.

Tombs noted that activity indicators from S&P Global, Lloyds and the Confederation of British Industry (CBI), as well as the extremely low level of GfK's consumer confidence index, are all consistent with falling GDP.

The S&P Global / CIPS Flash UK PMI Composite Output Index posted 48.3 in November. It has registered below the crucial 50.0 no-change value for four consecutive months.

The CBI in early December expected the UK economy to contract by 0.4 per cent next year.

In addition, the government looks set to pull back energy price support substantially next year, while higher interest rates will squeeze disposable incomes and spur households and businesses to pay off debt, Tombs noted.

As a result, there may be "a deeper and longer recession than we envisage for all other G7 (Group of Seven) economies", he added.


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