UK dodges recession as economy grows by 0.5%

THE UK economy nudged up in May as the nation swerves heading into recession during a crippling cost of living crisis. Gross Domestic Product (GDP) went up by 0.5% according to latest official data from the Office for National Statistics. It marks a bounce back from last month, when the ONS said GDP went down […]

THE UK economy nudged up in May as the nation swerves heading into recession during a crippling cost of living crisis.

Gross Domestic Product (GDP) went up by 0.5% according to latest official data from the Office for National Statistics.

It marks a bounce back from last month, when the ONS said GDP went down by 0.3% – although it revised this figure this morning to 0.2%.

GDP is used to measure the performance of a country’s economy.

When GDP goes up, the economy is generally thought to be doing well.

But when it goes down, it brings with it falling incomes, job cuts and lower consumption.

Economists predicted the economy would show zero growth between April to May.

That’s because the Bank of England estimated GDP would shrink between the months of April to June.

But latest figures show that all three main sectors of the economy – services, manufacturing and construction – performed better than expected.

Health services also helped to boost growth, mainly driven by a “large rise in GP appointments” according to the ONS.

ONS director for economic statistics Darren Morgan said figures show the economy had “rebounded”, adding “pent-up demand for summer holidays” also increased travel agency activity.

But while Chancellor Nadhim Zahawi said it was “great” to see the economy growing, he added that he was “not complacent” about the progress.

“I know people are concerned so we are continuing to support families and economic growth,” he said.

“We’re working alongside the Bank of England to bear down on inflation and I am confident we can create a stronger economy for everyone across the UK.”

Experts have previously warned that the nation could be heading towards a recession as a cost of living crisis cripples millions.

Inflation has soared to a 40-year high of 9.1% and is squeezing household budgets as bills from energy to food to fuel spiral.

While the CBI has said Britain is on the edge of falling into a recession and real household disposable income would fall 2.3% by Christmas.

Despite the positive figures this morning, economists are still predicting that Britain is at risk of falling into a recession later this year.

And according to data from YouGov and the Centre for Economic and Business Research, households reported their finances had worsened in the past month.

What is a recession?

A country is in recession when its economy shrinks over a sustained period of time, rather than growing normally.

It is calculated using GDP which in the UK is the value of all the goods and services added up in pounds. 

Generally speaking, if the GDP has fallen over two quarters (or six months), a country is said to be in recession.

Recessions are bad news, because they usually lead to unemployment and wage stagnation.

This in turn means the government gets less tax, which could mean cuts to services and benefits, or that rates go up.

There are lots of different factors that can cause a country to tip into a recession.

The UK last went into recession in 2020 after the coronavirus pandemic hit.

Prior to that, the UK was in recession in 2008/9 when the global financial crisis hit.