Revised figures for UK growth confirms recession avoided in 2022

April 5, 2023

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Revised figures for UK growth confirms recession avoided in 2022

Newly revised statistics show the UK economy performed better than previously estimated at the end of last year, as the threat of recession loomed.

It was previously thought the economy had not grown in the last three months of 2022, but new Office for National Statistics data shows it grew by a small, but welcome increase of 0.1%.

The latest figures confirm that the UK economy avoided falling into recession at the end of 2022.

The ONS stated telecommunications, construction and manufacturing had all fared better than initially thought, whilst household finances had been helped by the government's energy bill support scheme.

The main driver of the economy in the UK - the services sector - was boosted by a sizeable jump for travel agents which provided a welcome boost.

Manufacturing growth was driven by the drugs industry, and construction growth was up much more than previously thought.

The ONS also revised up its estimate for the economy's performance in the July-to-September quarter. It now says GDP fell by 0.1%, compared with its previous estimate of a 0.2% fall.

Last week, the Bank of England said that the economy was expected to grow only slightly in the coming months and these comments arose after increased interest rates to 4.25% from 4%.

Interest rates have been repeatedly hiked as the Bank attempts to get the soaring pace of price rises under control. And the current level of inflation remains close to its highest level for 40 years, and hit 10.4% in the year to February.

However, many economists predict the impact of these higher rates is yet to be truly felt.

UK-Asia trade deal to boost UK economy by 0.08%

The UK has signed a deal to join a trade pact with 11 Asia and Pacific nations, three years after it officially left the European Union in an attempt to revive UK exports.

Joining the group will boost UK exports by cutting tariffs on goods such as cheese, cars, chocolate, machinery, gin and whisky, the government said.

However, the government's own estimates show being in the bloc will only add 0.08% to the size of the UK's economy.

The trade area covers a market of around 500 million people. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership - or CPTPP - was established in 2018, and includes Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Membership of the CPTPP loosens restrictions on trade between members and reduces tariffs - a form of border tax - on goods, which provide welcome benefits for all involved.

Together, the 11 members account for about 13% of the world's income and after 21 months of negotiations, the UK has become the first European country to join.

However, the gains for the UK from joining are expected to be modest. gains in trading the government only estimates it will add 0.08% to the size of the economy in 10 years. 

Eurozone inflation falls sharply as energy prices drop

The eurozone’s annual inflation rate fell sharply in March as plunging energy prices eased growing pressure on the cost of living across the 20 countries that use the single currency.

Amid signs that upward pressure on prices is easing, the EU’s statistical agency Eurostat said the headline inflation rate dropped from 8.5% in February to 6.9% this month as energy costs fall.

The fall was because of the sharp increase in gas prices after Russia’s invasion of Ukraine not being repeated this year. As a result, annual energy inflation dropped from 13.7% to -0.9%.

In contrast to falling gas prices, the cost of food has continued to rise for eurozone consumers. Eurostat said food, tobacco and alcoholic drinks were 15.4% more expensive in March than a year earlier, compared with a 15% annual rise in February.

Core inflation – the cost of living excluding items such as fuel and food – rose slightly from 5.6% to a new record high of 5.7% as the impact of recent world banking events continues to take hold. However, some analysts predict the core inflation value is close to its peak and a fall may soon be observed across the EU.

Analysts have recently stated the European Central Bank was likely to pay more attention to core inflation than the headline measure of the cost of living, and would continue raising interest rates in response to this.

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