AJ Bell press comment – 12 December 2022
- GDP grew 0.5% in October following a 0.6% fall in September
- Economy shrank 0.3% over the 3 months to October compared to previous 3 months
- Bounce back from the service sector following extra bank holiday the key factor
Danni Hewson, AJ Bell financial analyst, comments on October UK GDP figures:
“October’s bounce back was expected, and the fact the growth was a little more enthusiastic than economists had anticipated is welcome. But this is just an aside – the story is unchanged, the economy is still shrinking and recession feels inevitable.
“Looking behind the headlines to where the growth nestles and there aren’t any surprises. The covid booster programme and winter ailments have dragged many people back into the health service with visits to GPs and accident and emergency departments both up.
“With a surge in demand for second-hand vehicles post covid, there’s been a corresponding uptick in demand for repair and maintenance as winter approaches. Batteries need replacing, brakes need checking and worn wiper blades have to be swapped out for new.
“For other consumer facing services, it’s a bit of a of numbers game. More working days mean more days to trade in, but here the bounce back doesn’t quite negate the fall. Hospitality in particular is being impacted by rail strikes and the haulage sector had its own tricky tango as industrial action at ports threw delivery timings off balance.
“Postal strikes have provided opportunities for private couriers to pick up the slack as consumers started their Christmas shopping early, both to spread the cost and ensure there was plenty of time to deal with any disruption.
“Employment agencies also had a good month as discontent over pay and conditions tempted some to consider a change of career or at least a change of employer. Just looking at the discrepancies between public and private sector pay it’s highly likely money has been a major contributing factor here, and with a week packed full of economic data the pieces should come together to give us a clearer picture of exactly where the country stands.
“And it’s not all doom and gloom, though the continued resilience of the construction sector and demand for new houses might have more to do with last year’s housing market than today’s, there are signs that prices are cooling and that could make a considerable difference to future plans.
“Manufacturing has also experienced a good month, with pharma demand on the up. But overall production was flat, and it seems odd to be harking back to unseasonably warm weather whilst freezing temperatures have us wincing at thermostats, but demand for power was down in October. Warm conditions clearly played a part, but with households facing higher bills there will also have been a degree of cutting back, saving money for the days people really need to hit those switches.
“Without huge global and domestic shifts or politicians and central bankers suddenly finding a magic wand, today’s positive numbers will be an outlier and the reality for all of us is that things are hard and going to get harder.”
