It is “touch and go” whether the UK economy fell into recession in the final quarter of last year, a think-tank declared yesterday after official data showed a rise in output in November.

The Office for National Statistics said UK gross domestic product rose by 0.3% month-on-month in November. This followed a 0.3% decline in October.

UK GDP fell by 0.1% in the three months to September.

A further decline in the fourth quarter would mean the UK was in technical recession.

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The EY ITEM Club said: “The economy grew 0.3% month-on-month in November, offsetting the previous month's fall. Some high-frequency indicators suggest that activity continued to pick up at the close of 2023. But with December also seeing NHS strikes, it's still touch and go as to whether GDP shrank in Q4.”

Martin Beck, chief economic adviser to the EY ITEM Club, said: “A pick-up in December's composite purchasing managers’ index (PMI) points to growth having continued in December. But NHS strikes that month will have dragged on the output of the public sector - something not captured by the PMI. It's therefore not out of the question that GDP fell in December and over Q4 as a whole, leaving the economy in a technical recession at the close of 2023.”

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He added: “Either way, the economy's performance over the last two years has broadly reflected stagnation. And the lagged effect of past rises in interest rates presents an obstacle to breaking out from that. But the outlook is brightening relative to the position of a few months ago. Fast-falling inflation has prompted a return to growth in real wages and, in anticipation of a loosening of monetary policy, a reduction in market interest rates, including mortgage rates.”

Thomas Pugh, economist at accountancy firm RSM UK, said: ‘The 0.3% [month-on-month] rebound in GDP in November puts the economy on course to have stagnated in Q4 rather than [having] contracted again. That would mean a recession has been avoided by the narrowest of margins possible. While the first half of this year is likely to remain tough, there are reasons to be more optimistic about the second.”

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He added: “Of course, we’re not out of the woods yet. One-off factors like fewer strikes and a rebound after Storm Babet helped to boost GDP in November and even a small contraction in December would be enough to tip the economy into recession. However, our base case is that the economy avoids a recession this year by the skin of its teeth.”