Unexpected economy growth combats cost-of-living concerns

Official gross domestic product figures (GDP) were released by the Office of National Statistics (ONS) today revealing a shocking increase of 0.1% in November. 

The shocking statistic beat the ONS’ original predictions that the economy would have experienced a further decrease of 0.3%.

Reports show consumers embarking on Christmas shopping and heading to bars and pubs to watch the World Cup in November has helped the government’s chances of avoiding a long recession.

Alongside the boost that has been provided by the retail sector, the pressure on energy bills is predicted to fall thanks in part to experiencing a warmer winter than excepted. According to bank Investec, Ofgem’s energy price cap could decrease to £2,400 in July 2023 – it currently stands at £2,500 and is due to rise to £3,000 in April. 

However, business groups have warned that we aren’t totally out of the woods yet as the economy is likely to suffer over the coming months with higher mortgage rates and the withdrawal of state support for energy bills, casting a blow to disposable incomes.

According to Nationwide, first-time buyer homes are the least affordable they have been for 15 years as a result of higher mortgage rates which are eating up 39% of net salaries. Although many analysts predict that house prices will fall this year, raising a deposit will remain a challenging hurdle due to the surge in property values over the past few years.

Additionally, increased interest rates imposed by the Bank of England, mean average annual payments of mortgages will increase by £3,000 for millions of people.

Samuel Tombs, the Chief UK economist at Pantheon Macroeconomics, said the verdict of whether the country will enter a long recession ‘hangs in the balance’, but remained certain the UK will be hit by one in the early half of this year.

‘Looking ahead, we continue to think that GDP [gross domestic product] will drop substantially in the first and second quarters of this year.’

Chancellor Jeremy Hunt has also reassured the UK that the government’s priority is to ultimately bring down inflation and alleviate the cost-of-living crisis.

Mr Hunt said: ‘We have a clear plan to halve inflation this year – an insidious hidden tax which has led to hikes in interest rates and mortgage costs, holding back growth here and around the world.’

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