UK economy slips into recession

The United Kingdom (UK) economy slipped into recession at the end of 2023, figures released by the Office for National Statistics (ONS), officially confirmed Thursday.

According to the report, the UK real gross domestic product (GDP) is estimated to have fallen by 0.3 per cent in the fourth quarter of 2023.

This, it said, follows an unrevised estimated fall of 0.1 per cent in the previous quarter.

“Across quarter 3 (July to Sept) and Quarter 4 2023, we estimate that the UK economy contracted by a cumulative 0.5 per cent. Compared with the same quarter a year ago, real GDP is estimated to have fallen by 0.2 per cent,” the report said.

The report explained that the UK GDP is estimated to have increased by 0.1 per cent in 2023, following growth of 4.3 per cent in 2022.

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“This is the weakest annual change in real GDP since the financial crisis in 2009, excluding the year 2020, which was affected by the coronavirus (COVID-19) pandemic. Data up to 2021 have been reconciled through the supply and use tables (SUTs) framework to produce one coherent estimate of GDP,” it said.

The report noted that nominal GDP is estimated to have fallen by 0.2 per cent in quarter 4 of 2023, attributed to a fall in gross operating surplus for corporations. Compared with the same quarter a year ago, nominal GDP is estimated to have increased by 5.0 per cent.

“The implied GDP deflator represents the broadest measure of inflation in the domestic economy, reflecting changes in the price of all goods and services that comprise GDP.”

It further explained that the GDP deflator covers the whole of the domestic economy, not just consumer spending, and also reflects the change in the relative price of exports to imports.

“The implied price of GDP rose by 0.2 per cent in Quarter 4 2023, where the quarterly increase is primarily driven by higher prices in exports, government consumption and household consumption.

“These were partially offset by a fall in the implied price for gross capital formation, as well as an increase in the implied price of imports, which contributes negatively to the GDP implied deflator. Compared with the same quarter a year ago, there was a continued easing in the GDP implied deflator, which increased by 5.2 per cent,” the report said.

It said there have been revisions to the implied deflator from Quarter 1 2023, particularly in Quarter 3 2023, where the implied deflator is estimated to have increased by 0.9 per cent, revised down from the previous estimate of 1.5 per cent.

“This revision is because of downward revisions in gross capital formation and net trade,” it added.