Hargreaves Lansdown: UK GDP rises 0.1% in November, but recession still likely

by | Jan 13, 2023

Hargreaves Lansdown

Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown, comments on the UK GDP rise:

“Monthly UK GDP is estimated to have grown by 0.1% in November, which is better than expected. Growth came primarily from the Services sector, with other areas struggling. While this data set offers some positivity, the broader picture still poses challenges. On a three-monthly basis, the UK still shrank, and a 0.1% gain on a monthly basis smells heavily of stagnation, rather than real growth. The idea that the UK will formally enter a recession soon is still very much a likelihood. The boost in November could stem from extra spending in the economy in the run up to Christmas, and there’s real risk now that consumers are going to tighten their belts. As people’s incomes come under such pressure because of inflation, and businesses grapple with the January slump, the amount of economic activity taking place is likely to reduce from here. Policymakers are keen to see heat taken out the economy because this will help to bring inflation down, which will eventually end the continuous rise in interest rates. Ultimately, it’s nice to see the UK squeeze out half an ounce of economic growth, but very real challenges persist.

“Apple’s boss, Tim Cook, will see his total pay package reduced by over 40% this year. The move comes as Cook requested the change, following criticism from shareholders. The difference to take home pay isn’t where he will feel the squeeze. The main change will be how Mr Cook is awarded shares in the firm. Last year, the Apple boss was granted $75m of shares, with half dependent on Apple’s share price performance.  The stock award target has been cut to $40m, and the proportion reliant on share price performance has been upped. Investors have been left unhappy with Apple’s share price, which is down over 22% in the last year. That’s partly because of supply chain disruption but also a result of the wider tech sell-off, where investors fled more highly valued companies as market and economic conditions became highly uncertain. In reality, Tim Cook’s pay package doesn’t move the dial for Apple, but it will be taken as a gesture of goodwill by investors who are increasingly engaged with governance and corporate accountability.

“Following severe service delays because of strikes, Royal Mail is facing fresh turmoil after a Russian cyber incident. The move is making it highly difficult to fulfil overseas deliveries, which comes as a real knock to the group – Royal Mail has been haemorrhaging cash in recent times. This particular incident is unlikely to be fixed overnight, but HQ will be keen to get things moving as quickly as possible. Away from the operational damage, there are longer-term implications for reputation that come with being unable to provide a reliable service. Royal Mail is an important piece of the UK’s national infrastructure and a failure to keep things moving has a direct impact on economic activity.

“Brent crude futures are trading near $84 per barrel, and are on track to gain about 6% this week. That reflects higher demand hopes in China and the potential for in-line or weaker-than-expected interest rate hikes in the US, following the lighter inflation reading on Thursday. The oil price doesn’t seem affected by news that China’s exports fell 9.9% in December, which indicates decelerating demand at home and abroad.”

Find out more about Hargreaves Lansdown.

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