Santander says ‘UK to receive its recession badge next week’

Due to a stormy December, the UK is expected to receive its recession label next week when the ONS certifies a decrease for the second straight quarter.

Economists at Santander estimate that the economy in the last quarter of the year probably posted a -0.2%.

"The UK economy remains on the very cusp of a recession, with our forecast of a 0.2% fall in December GDP enough to deal the final blow and deliver a mild 0.1% contraction in output in the final three months of the year," writes Gabriella Willis, UK economist for Santander CIB.

On February 15 at 07:00 GMT, the UK GDP figures for December 2023, the last quarter, and the entire year 2023 are expected.

Based on very weak retail sales data that revealed a more than 3% decline, Santander anticipates that December's production statistics will show that the services sector declined by 0.3% compared to November.

According to the ONS, UK retail sales in December came in below estimates, with a month-over-month reading of -3.2%. The yearly percentage was -2.4%, more than 3.5 percentage points less than the 1.1% rise the market had anticipated.

Due to storms Elin, Fergus, and Gerrit, Santander claims that weather has played a significant role in the GDP picture for December.

This would have disrupted travel within the services sector, suppressed consumer spending, and put the construction industry on the defensive.

Santander, who completed the picture and made sure all three of the major UK industries fell month over month at the end of last year, is not holding out much hope for a spike in manufacturing activity.

(Sources: investing.com, poundsterlinglive.com)