MNI INTERVIEW: Some Good Signs Amid Sluggish UK Growth-ONS

The UK economy will likely be sluggish at best for a few quarters yet, but bright spots are appearing through the gloom, the chief economist at the Office for National Statistics told MNI Friday.

“The headline is the UK avoided a recession, but we shouldn’t be too focused on numbers that are plus or minus a small amount,” Grant Fitzner said, speaking as official data showed the UK saw flat output in the last three months of 2022, thereby missing a technical recession by the narrowest of margins.

“Added to that, these numbers are very likely to be revised one way or another in the coming quarters,” he noted.

Fitzner said a slowdown in the service sector in December had weighed heavily on the growth number, with the early part of the quarter seeing fairly robust expansion.

“The outcome is in line with Bank of England thinking,” he said, with growth sluggish, but not severe.

Early signs for January suggest that businesses remain pressured, with many seeing a decline in activity across the month, suggesting weaker growth for the short term at least.

BRIGHT SPOTS

But Fitzner said not all was doom and gloom, with some few bright spots emerging – although not yet enough to point to green shoots of recovery. Gas prices are much lower than had been feared, for one.

“Dutch TTF contracts are trading at 17-month lows – below levels even seen in the run up to the Ukraine invasion,” Fitzner noted. “Even futures contracts for next winter are much lower than feared.”

This will give consumers a much needed boost as government support measures end later this year, he siad.

Other positives include the labour market, where unemployment is rising only very slowly and vacancy rates still remain very high, although off the best levels.

“It’s not uniform and not across all industries, but there are certainly some areas that are still having great difficulty in attracting the workers they need,” Fitzner said.

“So overall, some good, some bad,” he said. “Much like in the U.S., over any reporting period, we see six pieces of data that err to the stronger side of expectations and six pieces that are weaker than expected.”

As for the UK’s performance relative to its peers, Fitzner said the outlook could often be clouded by differences in recording the performance of much of the public sector in national accounts. Over the longer run, these differences tend to wash through, as revised data comes in, he added.

The UK economy remains the only one in the G7 still smaller than pre-Covid, sitting 0.8% below its level in Q4 2019.

Current underperformance could in part be due to the fact the UK emerged from Covid lockdowns sooner than most, so slowed sooner after an initial surge. However, this was no guarantee that the upturn would come any sooner, as the UK faces strong headwinds in coming months.