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Holiday bookings boost GDP but economists warn of ‘slowcession’

Jonathan Prynn @JonPrynn

A POST-PANDEMIC holiday booking boom helped push GDP into positive territory and avoid a feared recession at the end of last year, new official data reveals today.

The estimate of Britain’s economic output in the three months from October to December was revised up from zero to 0.1% by the Office for National Statistics (ONS).

The GDP upgrade rounded off a generally more encouraging week for the economy after the shock rise in inflation and stock market slumps amid fears of a fresh banking crisis earlier in the month.

The FTSE 100 is up around three per cent this week and today stood at 7636.03, up 16 points. The pound has also seen gains and stood today at near $1.24, its highest level since last June.

The revision means that GDP stood at 0.6% below where it was immediately before Covid struck in the last quarter of 2019. Previously the ONS had thought it was 0.8% behind pre-Covid levels.

Detailed data showed that the dominant services sector grew by 0.1% with “administrative and support service activities”, which includes travel agents, increasing by 10.8%.

The estimated fall in business investment was also revised from a drop of 4.8% to a decline of just 0.2%.

There was also slightly better news on living standards with household real disposable income up 1.3% in the quarter — in large part thanks to government energy bill handouts — after four consecutive quarters of declines.

However, economists warned that while the UK is likely to avoid a technical recession — two consecutive quarters of negative growth — it could be set for a long stagnant period dubbed “slowcession.”

Danni Hewson, head of financial analysis at broker AJ Bell, said: “As growth goes it’s pretty feeble but remember this was the moment the UK had been expected to enter a recession, so the fact GDP figures have been revised upwards is something to celebrate.

“Households have found their finances and savings bolstered by those energy support payments that have been dropping into accounts in dribs and drabs since October, along with finding their actual energy bills were substantially lower than they might have been thanks to the government’s cap.”

Thomas Pugh, economist at RSM UK, said it expected GDP “to contract in Q1 and flatline at best in Q2. When the economy starts to return to growth towards the end of this year, it is likely to be glacially slow. The economy probably won’t be any bigger in 2024 than it was in 2019, marking four years of no growth, or what we would term a slowcession.”

Ruth Gregory, deputy chief economist at forecasters Capital Economics said: “We still think that about two-thirds of the drag of higher interest rates has yet to be felt and that the economy will slip into a recession involving a peak to trough fall of about 1% this year.”

As growth goes it’s pretty feeble but this was the moment the UK had been expected to enter recession Danni Hewson, AJ Bell

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2023-03-31T07:00:00.0000000Z

2023-03-31T07:00:00.0000000Z

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