GDP Remains Flat in Q3; Recession Avoided This Year

Main points

• Monthly GDP grew by 0.2 per cent in September, higher than our previous forecast of no growth, following an expansion of 0.1 per cent in August. This monthly figure was mainly driven by growth in the services sector, which saw increasing activity in the professional, scientific and technical activities, and human health and social work activities sub-sectors. The latter was likely boosted by the latest Covid-19 vaccination campaign, which offset the impact of industrial action in the healthcare sector in September.
• GDP remained flat in the third quarter of 2023 relative to the previous three-month period, slightly better than our forecast of a shallow contraction of 0.1 per cent, thanks to a positive contribution from net trade offsetting contractions in business investment, household spending and government consumption. We now forecast GDP to grow by 0.1 per cent in the fourth quarter of this year, entailing our central forecast does not expect a recession in 2023. These forecasts remain broadly consistent with the longer-term trend of low, but stable economic growth in the United Kingdom. It should be noted that this growth profile was not affected by the recent revisions to GDP estimates.
• For a comprehensive forecast of the UK economy, please see our Autumn UK Economic Outlook, published earlier this week.

“Today’s data indicate that GDP grew by 0.2 per cent in September relative to August, driven mainly by growth in the services sector. More broadly, GDP remained flat in the third quarter of 2023 relative to the second quarter, as services output fell by 0.1 per cent, production output remained flat and construction output grew by 0.1 per cent. These figures are consistent with our forecast in our recent Autumn UK Economic Outlook, published earlier this week, in that the outlook for UK GDP growth remains sluggish and we do not expect a recession to ensue in the short or medium-term.”

Paula Bejarano Carbo
Associate Economist, NIESR