The UK economy has shown a surprising uptick in growth at the end of 2024, according to new figures released by the Office for National Statistics (ONS). The data reveals that the economy grew by 0.1% in the last quarter of 2024, following a period of no growth in the previous three months.
The ONS estimates that monthly real gross domestic product (GDP) grew by 0.4% in December 2024, a significant improvement compared to the 0.1% growth in November 2024 and a decline of 0.1% in October 2024. This growth was primarily driven by the service sector, which saw a 0.4% increase in output in December 2024.
Despite the positive monthly figures, the overall annual GDP growth for 2024 was modest at 0.8% compared to 2023. The ONS also noted that while production output grew by 0.5% in December 2024, it fell by 0.8% over the three months to December 2024, largely due to a decline in manufacturing output.
The construction sector experienced a slight decline of 0.2% in December 2024, following growth of 0.6% in November 2024. However, it still managed to grow by 0.5% over the three months to December 2024.
Economists had been expecting a contraction in the last quarter of 2024, making this growth a welcome surprise. However, the ONS data also highlights ongoing challenges, including weak consumer confidence and the impact of recent budget measures on businesses and jobs.
The ONS figures have provided some relief to the government, but the risk of a shallow recession remains, with future revisions potentially tipping the balance either way.
George Lagarias, Chief Economist at Forvis Mazars commented on today’s figures: “December growth significantly surprising on the upside may be good news, but we wouldn’t pop the champagne just yet. The spectre of stagflation is very much alive.
“The upside came mainly from the service sector, and in particular professional services. However, the more forward-looking January PMI data on British services suggest that orders remain soft, corporate risk aversion high and employment conditions are deteriorating. While we can’t totally dismiss a good growth number, we don’t think that it alone will move the needle for the Bank of England which is on a dovish path.”
