United Kingdom: economic indicators quarterly changes
According to the latest business surveys, economic activity in the UK continues to contract. According to the Confederation of British Industry (CBI), confidence balances in the industrial and distributive trades sectors (retail and wholesale sales) are clearly deteriorating while rebounding slightly in the services sector.
Against a backdrop of a cost of living crisis, consumer confidence again deteriorated in January (-45 points for the GfK index), close to its record low reached last September (-49 points). However, consumer confidence in the economic situation over 12 months was slightly less negative (-54 points) having reached its lowest level in September (-68 points).
Headline inflation fell for the second month in a row, standing at 10.5% year-on-year in December (compared to 10.7% in November) while core inflation was stable at 6.3%. The Monetary Policy Committee (MPC) of the Bank of England (BoE) is expected to raise its key interest rate further at its February meeting, particularly as business data provided a positive surprise in November.
The signs of easing in the labour market are still too limited to slow the momentum in wage growth. According to the latest employment figures, the unemployment rate remained stable in November (3.7%). The increase in employment (+27k) did not compensate for the increase in the number of unemployed (+56k).
Our forecasts suggest that UK GDP is likely to contract further in Q4 2022 (-0.3% q/q), despite the surprise upturn in growth in November. In the context of the cost of living crisis and significant uncertainties about economic activity, consumer spending and private investment are expected to make negative contributions to growth in Q4. This recession is expected to continue for much of 2023.
GDP growth q/q: actual, carry-over and forecasts
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