The economy grew in October, but that doesn’t mean the recession is off.
New figures from the Office for National Statistics (ONS) revealed that gross domestic product (GDP) increased by 0.5% in October.
This is the monthly value which measures all the output from a country and is seen as a marker of the economy’s health.
Despite this seeming to be positive news, many analysts have pointed out this mainly occurred because of the huge economic dip we experienced in September, when the GDP decreased by 0.6%.
The Queen’s death during this month seriously impacted economic activity across the UK, due to the additional bank holiday, while the short-lived mini-budget caused additional mayhem.
But the economy was already starting to shrink because people were already spending less even prior to the national mourning period – GDP fell by 0.2% during the second quarter of the year between April and June.
A recession is also more likely when there is pressure on people’s finances, such as inflation or a cost of living crisis, as we are experiencing now.
And, although October’s numbers look positive, when you look at the whole quarter, between August and October, the economy still shrank by 0.3%.
A recession is defined as two consecutive quarters of negative growth in the economy, so all eyes are on the coming months to see if the UK economy gets smaller.
Responding to the figures, chancellor Jeremy Hunt said: “While today’s figures show some growth, I want to be honest that there is a tough road ahead.
“Like the rest of Europe, we are not immune from the aftershocks of Covid-19, Putin’s war and high global gas prices.”
Hunt previously suggested the UK was already in recession when he announced his autumn statement in November, when he announced £55 billion in tax rises and spending cuts.
The Bank of England has predicted that the longest recession in the UK for 100 years is looming, lasting around five quarters until the middle of 2024.
This would mean being in the longest recession “since records began”.
It also predicted a “very challenging” two-year fall in employment levels, with unemployment potentially doubling to 6.5%.
However, the recession is not expected to be as “deep” as it was during the financial crash of 2008, meaning it won’t shrink to the same extent (although we can’t know this for sure yet).
The Bank of England also expects inflation – currently at a 41-year-high of 11.1% – to decline and be below the target level of 2% within two years.
The UK was last in recession during the height of the pandemic in August 2020, due to lockdown. The UK’s GDP dropped by 20.4% as people lost their jobs or were furloughed.
