UK economy 'bounced back' in November with 0.3% growth

Figures show struggles continue, but retail, car leasing and computer games had 'buoyant' month, says Office for National Statistics

A furniture store in London. The main momentum for the UK's November growth came from the services sector, where output increased by 0.4 per cent. EPA

The UK economy grew by 0.3 per cent in November, according to figures from the Office for National Statistics.

The weak growth was slightly above the expectations of economists, who had predicted a 0.2 per cent expansion of gross domestic product, following a 0.3 per cent fall in October.

The main momentum for the November growth came from the services sector, where output increased by 0.4 per cent.

Production output grew by 0.3 per cent on the month, while construction fell by 0.2 per cent.

“GDP bounced back in the month of November, led by services with retail, car leasing and computer games companies all having a buoyant month,” said ONS chief economist Grant Fitzner.

Chancellor Jeremy Hunt said that “while growth in November is welcome news, it will be slower as we bring inflation back to its 2 per cent target”.

“But we have seen that advanced economies with lower taxes have grown more rapidly, so our tax cuts for businesses and workers put the UK in a strong position for growth into the future.”

Inflation in the UK was 3.9 per cent in November, with the December reading due out next week.

Recession fears

Building work near St Paul's Cathedral in London. UK construction output fell by 0.2 per cent in November, following a year of rising interest rates. EPA

Ben Jones, lead economist at the business lobby group the Confederation of British Industry said the weak growth still continued to suggest that the UK might have slipped into recession in the second half of last year.

“The CBI’s latest surveys suggest the economy will struggle to gain any traction in the near term, as consumers rein in spending and firms face a trio of headwinds in the form of subdued demand, cost pressures and ongoing difficulties finding the staff they need,” he said.

The broader analysis of the British economy was less upbeat, as the quarterly figure showed a contraction of 0.2 per cent over the three months to the end of November.

“The longer-term picture remains one of an economy that has shown little growth over the last year,” Mr Fitzner said.

Cautious optimism

Nonetheless, Alice Haine, personal finance analyst at Bestinvest, said falling inflation, easing mortgage rates and the prospect that the Bank of England will cut interest rates later this year means that “there is a renewed sense of hope at the start of 2024 that things really are going to get better”.

“While optimism is certainly in the air, households should remain cautious about spending, with potential headwinds for the year ahead including global challenges, such as the escalating tensions in the Middle East, as well as domestic headwinds including slowing wage growth, declining vacancies and the potential for rising mortgage arrears as more people roll off cheap deals taken out before interest rate rises began in December 2021,” she said.

Stuart Cole, chief macro economist at Equiti Capital feels any euphoria brought on by the slight bounce in the November GDP figures could be short-lived.

“It leaves the economy hovering on the brink of recording a technical recession if December’s reading turns in a negative print, a month that was disrupted by wet weather sufficient to impact negatively on consumer spending and which also saw further strike action from doctors in the National Health Service,” he said.

“At this stage it looks hard to see growth in December being sufficient to overcome the recession risk, particularly given the downward revision to -0.2 per cent for the three month period to November.

“The best that can probably be hoped for is zero growth, which would leave growth over Q4 as a whole virtually flat also.”