Recession by no means certain

UK GDP same as December 2021 but recession by no means certain

Commenting on today’s GDP report (August), Nitesh Patel, Strategic Economist at Yorkshire Building Society, said:

“The 0.3% m/m fall in GDP in August is a continuation of weakness in activity since the end of last year. In fact, UK GDP is at the same level as last December, and 0.9% below where it was in May. Consumer-facing sectors, such as retail and hospitality, are faring the worst – probably due to households reining in their spending due to the cost-of-living crisis. Yesterday’s labour market data is largely showing the jobs market performing strongly, with the unemployment rate a 48-year low, vacancy levels still high but wage growth failing to keep up with inflation.

“High inflation and the extent to which borrowing costs rise will determine whether we  have a mild or deep recession – or if we avoid one altogether.

To achieve the latter depends on our policymakers and how they manage the recent volatility in the financial markets. One way is perhaps to bring forward the Medium-Term Fiscal Plan – this could help calm nerves and reassure markets the government has a sustainable fiscal plan. The alternative is to allow the uncertainty to continue, which will not help anyone.”