UK economy returned to growth in October with 0.5% rise in GDP
The economy returned to growth in October, with UK gross domestic product (GDP) estimated to have grown by 0.5%.
However, the Office for National Statistics (ONS) said that the economy shrank by 0.3% in the three months to October, compared with the three months to July.
The growth of 0.5% followed a contraction of 0.6% in September which was largely put down to the additional bank holiday for the state funeral of Queen Elizabeth II.
October's partial recovery was mostly explained by the number of working days returning to normal rather than any real surge in output.
The services sector grew by 0.6% in October 2022 and was the main driver of the growth in GDP.
Darren Morgan, ONS director of economic statistics said: “The economy bounced back in October, recovering from the impact of the additional bank holiday for the state funeral.
Read more: Real wages shrank by nearly £80 a month this year, says TUC
“In particular, car sales rebounded after a very poor September, while the health sector also saw a strong month, with GP appointments, A&E attendance and the COVID-19 autumn booster campaign all driving up the sector.
“Construction continued its strong trend over the last year and stands at its highest level on record, with new housebuilding driving growth this month.
“However, over the last three months as a whole the economy shrank, with falls seen across services and manufacturing.”
GDP grew 0.5% in October, following a fall of 0.6% in September.
However, over the last three months as a whole, the economy fell 0.3%.
➡️ https://t.co/lwx4LuzmjP pic.twitter.com/YBmr67b2ln— Office for National Statistics (ONS) (@ONS) December 12, 2022
Chancellor Jeremy Hunt warned of a “tough road ahead”.
"It's a very challenging international picture. About a third of the world's economies are predicted to be in recession either this year or next. We're no different in this country."
Chancellor @Jeremy_Hunt speaks to @EdConwaySky about today's GDP statistics & the UK economy. pic.twitter.com/Mnrj1HY5eG— HM Treasury (@hmtreasury) December 12, 2022
He said: “High inflation, exacerbated by Putin’s illegal war, is slowing growth across the world, with the IMF predicting a third of the world economy will be in recession this year or next.
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“While today’s figures show some growth, I want to be honest that there is a tough road ahead. Like the rest of Europe, we are not immune from the aftershocks of COVID-19, Putin’s war and high global gas prices.
“Our plan has restored economic stability and will help drive down inflation next year, but also lay the foundations for long-term growth through continued record investment in new infrastructure, science and innovation.”
NEW
UK GDP rises 0.5% in October. Follows a 0.6% fall in Sept, mostly caused by the bank holiday around the state funeral for HMQ.
So this figure is a bit stronger than it might at first look.
The broader picture is still consistent with UK heading into recession pic.twitter.com/eqq5EdL7kz— Ed Conway (@EdConwaySky) December 12, 2022
Economists still expect a recession to be confirmed at the end of the year as output is tipped to be negative during the current fourth quarter as a whole, following the 0.2% dip recorded for the third quarter to September.
“October’s rebound is a false dawn for the economy as it mostly reflects the favourable comparison with September when activity was supressed by the bank holiday for the Queen’s funeral," Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales (ICAEW), said.
“The positive start to the fourth quarter may not prevent recession with the growing squeeze on incomes likely to drive falls in GDP in November and December, despite a possible boost to consumer activity from the World Cup.
Read more: Bank of England 'set to raise' interest rates to 3.5%
“A half-point interest rate rise on Thursday is expected. However, tightening monetary policy too aggressively could risk worsening the financial outlook for firms and households, and extend the looming downturn.”
Jeremy Batstone-Carr, European strategist at investment bank Raymond James, said rising inflation and higher interest rates are hitting growth.
“This tentative rebound from sharply falling GDP in September may look like a positive step back toward growth, but we should not get over-excited. Half of September’s fall in GDP was due to the one-off bank holiday for the Queen’s funeral, so we were always likely to see a correction as the UK returns to regular working days. Today’s GDP figures flatter to deceive, concealing an otherwise-shrinking economy," he warned.
