The UK economy is estimated to have grown 0.5% in October, according to data from the Office for National Statistics.
This was a reversion of the 0.6% fall seen in September, a month which was impacted by the additional bank holiday for the Queen’s funeral.
Looking at the three-month window, GDP fell by 0.3% in the three months to October 2022 compared with the three months to July 2022.
October’s growth was slightly stronger than economists had forecast, having put it at just 0.4%.
The main sector contributors were the services sector, which grew by 0.6% after falling by 0.8% in September, the largest driver coming from wholesale and retail trade.
The construction sector grew by 0.8% in October 2022, making it its fourth consecutive increase.
Jeremy Batstone-Carr, European strategist at Raymond James, called this data a “positive step back towards growth” but heeded caution about getting overtly excited, since September’s results had been unexpectedly skewed.
He said: “Today’s GDP figures flatter to deceive, concealing an otherwise-shrinking economy.”
The data is key for determining if the UK is in a recession or not, although GDP contracted for the prior two months meeting the criteria for a technical recession, but the strategist said the UK was not “teetering on the edge of a recession, it is fully in one”.
“We are now feeling the pain of relentless inflation and interest rate rises, which are both crippling business and household spending.”
James McManus, chief investment officer at Nutmeg, commented: “The worst recessions usually follow a period of excess, where companies and consumers borrow too much and then the downturn is much more painful.
“In recent years there has not been enough of a boom to worry about a bust.”
All eyes will now be on the Bank of England’s next Monetary Policy Committee meeting on on Thursday 15 December and how they go about the next set of rate hikes.
According to reports though the Committee are divided on how much interest rates should be increased by, with the group split between a more modest approach and harsh hiking.
At present a 0.5% increase is the general market consensus.
Comment from Mike Hedges, Beard Construction director
“The slight surprise for the sector here is that as of October, the ONS Construction Output data is still showing a rise in output. This is the fourth consecutive monthly growth, with October 2022 showing the highest level of construction output (£15,248 million) since records began in January 2010, with output being almost 5% higher than before the pandemic began in February 2020.
“This comes on the same day that GDP rose by 0.5% in the last month, slightly outstripping the 0.4% expected, although the overall trend over the past three months was a decline of 0.3% compared to the previous quarter.
“Much of the rise in construction was led by new housing, with private commercial new work dropping back in volume and it is likely that when the statistics for November and December are released, they will also show further slight decreases in volume.
“On the ground, the construction sector has been dealing for months with inflationary pressures and the rising cost of commodities like fuel, steel and other materials. The effect of continuing price inflation and a challenging new business environment won’t be properly understood until 2023 is fully underway.
“The headline inflation figure does not reflect the true rise in prices of materials like brickwork and aluminium – the price of which is being driven up by up to 50 per cent by increased fuel costs and global disruption to supply chains.
“As the fight for new work gets more challenging, the sector must avoid a race to the bottom on tenders as next year progresses. Continuing an open, realistic dialogue on costs between clients, contractors and suppliers will be important to help us navigate the economic challenges we will face.”
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