Technically In Recession ... The Bears Are Watching ...

We have had a few days now to digest the latest GDP Data for the U.K. economy. It has taken a few days since, like the King of Siam …

"There are times, I almost think I am not sure, of what I know
I very often find confusion in conclusion"

Confusion was compounded this weekend by headlines which appeared to suggest the UK was escaping from recession, after set backs in the third and fourth quarters of 2023.

Indeed the ONS commentary was upbeat. Real gross domestic product (GDP) is estimated to have grown by 0.2% in the three months to February 2024, compared with the three months to November 2023.
It is confusing. I have concluded there is confusion in conclusion. There is a fashion to report growth as a month on month, or quarter on quarter, phenomenon.

Call me old fashioned but the valid conventional measure of growth is year on year and not quarter on quarter.

The data set [ED2R GVA at basis prices] confirms year on year, growth slowed from 0.6% in Q1 last year to 0.5% in Q2 and Q3, before slipping to -0.2% in the final quarter.

The data suggests growth in January was down by -0.1% and down by -0.2% in February. The bears are watching. Barring a bounce back in March, the first quarter of the year, will confirm the UK is in recession, with two successive quarters of negative growth year on year.

Slipping into recession, no turning the corner, no light at the end of the tunnel, no dawn of recovery, no green shoots, no bouncing back, no storm passing.

The Prime Minister may think “Wages are up. Energy bills are falling. Pensions are going up. Tax cuts are now already happening and benefiting people.

The chancellor may think we are "Breaking Through The Clouds" when he set out his vision for long-term prosperity in the UK, optimism despite economic headwinds.

Hunt may believe the economy is "back on track". He has rejected the "gloom" about the UK's economic prospects and declaring "declinism about Britain is just wrong."

Both Hunt and Sunak should take a hard look at just what happened in the final quarter of last year. There was some good news. Education and healthcare were up by almost 2%. Manufacturing output was up by over 1.2%.

But construction output fell by -0.5%, retail and distribution was down by almost 1%. Accommodation and food down by 1.5%. Transport and storage down by over 3%.

Into the first quarter of 2025 and the poor performance of the service sector continues, falling by 0.3% year on year. The latest jobs data suggest the unemployment rate is rising as vacancies continue to fall.
The bright spot, the arts and entertainment sector is growing by over 6.5% this quarter compared to almost 5% in the last quarter of the prior year. Which just goes to show the information should all be shared with a pinch of uncertainty.

Let’s hope we are back on track and breaking through the clouds. Technically we are in recession and the bears are watching ...