UK households 'enjoying a last hurrah' before tightening their belts in 2023
UK households enjoyed “a last hurrah” of spending before economising for 2023, a leading researcher has said.
It comes as the economy unexpectedly grew in November, reducing the risk of the UK entering a recession for now.
The Office for National Statistics (ONS) had recorded an increase of 0.1% as the services sector remained in growth despite the cost of living crisis.
The National Institute of Economic and Social Research (NIESR), responding to Friday’s announcement, said it was “possibly a sign that households are enjoying a last hurrah before they tighten their belts in 2023”.
Its deputy director, Prof Stephen Millard, cautioned that despite the surprising growth - analysts had predicted the economy would shrink by 0.3% in November - 2023 is "still looking to be a year of anaemic growth".
Consumer-facing industries were the biggest growth driver of the month, witnessing a 0.4% increase amid a lift from higher food and drink sales during the World Cup. England and Wales played eight games between 21 November and 10 December.
The service sector also grew by 0.2% as more punters visited pubs and other venues, although this still reflected a slowdown from a 0.7% rise a month earlier.
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ONS director of economic statistics Darren Morgan said: “The economy grew a little in November, with increases in telecommunications and computer programming helping to push the economy forward.
“Pubs and bars also did well as people went out to watch World Cup games.
“This was partially offset by further falls in some manufacturing industries, including the often-erratic pharmaceutical industry, as well as falls in transport and postal, partially due to the impact of strikes."
Economists have suggested the latest data make it less clear whether the UK will have entered a recession at the end of 2022.
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Kitty Ussher, chief economist at the Institute of Directors, said: “This is stronger activity than was expected for November and so will further contribute to the improvement in market sentiment we have seen in the last few weeks.
“Given we know the economy also grew in October - albeit driven by a rebound from the period of state mourning [following the Queen's death, which saw an extra bank holiday], it is no longer certain that the economy will meet the technical definition of a recession when the final data for 2022 is in.”
Inflation had also started to cool down in November, dropping to 10.7% from a 41-year-high of 11.1% a month earlier - and it is expected to drop further through 2023.