However, with other data sources soft in recent months, and the potential for activity to have been disrupted by widespread industrial action in December, there's still a possibility that GDP fell on a quarter-on-quarter basis in Q4 2022. And the near-term outlook remains very challenging for consumers and businesses alike, so falls in GDP look likely in the first half of 2023.
EY ITEM Club Winter Forecast published on 23 January.
Martin Beck, chief economic advisor to the EY ITEM Club, says: “GDP grew by 0.1% month-on-month in November, with the rise entirely due to an increased output in the services sector. The ONS attributed part of November's upside surprise to the beginning of the men’s football World Cup, which it said boosted activity in the food and hospitality sub-sectors. As such, the EY ITEM Club thinks that temporary factors may have been the reason for November’s performance.
“Activity in December is likely to have been affected by widespread industrial action. This will have had both a direct impact on output from the lost working days and an indirect impact, with the disruption to the rail network preventing workers in other sectors from getting to work. The EY ITEM Club expects the impact to have been relatively modest, but it's enough to mean that – absent historical revisions – it will be touch-and-go whether GDP fell again on a quarter-on-quarter basis in Q4 2022.
“The near-term outlook remains challenging. Notwithstanding consumer resilience in November, households are continuing to experience significant falls in real incomes. Meanwhile businesses face their own cost pressures and are seeing demand soften both at home and abroad. Against this backdrop the EY ITEM Club expects the UK economy to experience a shallow recession in H1 2023, with GDP beginning to recover in the second half of this year as inflation falls back and real incomes turn a corner.”