10:36 am, December 12, 2022
Improved car sales fuelled growth in the economy in October but experts have warned that the boom is likely to be short-lived.
Data from the Office for National Statistics (ONS) found that GDP grew by a larger-than-expected 0.5 per cent between September and October, compared to a 0.6 per cent contraction the previous month.
Leading economists say that the rise in car sales was a huge factor in the improvement, as well as manufacturing – which includes car building – which rose by by 0.7 per cent.
Darren Morgan, ONS director of economic statistics, said: ‘The economy bounced back in October, recovering from the impact of the additional bank holiday for the state funeral.
‘In particular, car sales rebounded after a very poor September, while the health sector also saw a strong month, with GP appointments, A&E attendance and the Covid-19 autumn booster campaign all driving up the sector.
‘Construction continued its strong trend over the last year and stands at its highest level on record, with new housebuilding driving growth this month.’
GDP grew 0.5% in October, following a fall of 0.6% in September.
However, over the last three months as a whole, the economy fell 0.3%.
➡️ https://t.co/lwx4LuzmjP pic.twitter.com/YBmr67b2ln
— Office for National Statistics (ONS) (@ONS) December 12, 2022
Despite the good news in October, experts have warned that the bigger picture is still one of a shrinking economy amid the cost-of-living crisis, with the UK set to suffer a prolonged recession.
The Bank of England is still battling to rein in sky-high inflation that is weighing on growth and is set to hike interest rates again on Thursday despite the worsening economic outlook.
Economists are pencilling in a rise from three to 3.5 per cent – which would be the highest level for 14 years.
Chancellor Jeremy Hunt said: ‘While today’s figures show some growth, I want to be honest that there is a tough road ahead.
‘Like the rest of Europe, we are not immune from the aftershocks of Covid-19, Putin’s war and high global gas prices.”
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales (ICAEW), said October’s rebound was a ‘false dawn for the economy’.
He said: ‘The positive start to the fourth quarter may not prevent recession with the growing squeeze on incomes likely to drive falls in gross domestic product (GDP) in November and December, despite a possible boost to consumer activity from the World Cup.
‘A half-point interest rate rise on Thursday is expected. However, tightening monetary policy too aggressively could risk worsening the financial outlook for firms and households, and extend the looming downturn.’
