In the final quarter of 2023, Britain joined Japan and Germany in recession, marking a downturn for three of the world’s top eight economies. China, the second-largest economy globally, faced deflation and weak growth, exacerbated by a worsening property crisis as it emerged from its week-long Lunar New Year break.
Data released in London revealed a 0.3% shrinkage in the UK economy from October to December, plunging it into recession in the latter half of 2023 following a 0.1% contraction between July and September. Japan's economy contracted by an annual 0.4%, while Germany saw a 0.3% contraction throughout 2023, according to preliminary data from the Federal Statistics Office.
The Office for National Statistics reported declines across all major sectors in the UK, with services down by 0.2%, production by 1%, and construction output by 1.3% in the fourth quarter. Despite a meager 0.1% rise in December, the UK's GDP for 2023 is estimated to have increased by only 0.1%, compared to the 4.3% surge in 2022, marking its weakest growth since 2009.
Japan's economy also faltered, with fourth-quarter GDP unexpectedly contracting by 0.1%, confounding market forecasts of a 0.3% increase. Notably, UK GDP per capita declined by 0.6% in Q4, while Japan's private consumption, comprising over half of its economy, fell by 0.2%.
Despite the downturn, Japan's markets remained resilient, with the Nikkei 225 index rising by 1.2% and closing above the 38,000 level for the first time since 1990. Analysts predict a short-lived recession, with Goldman Sachs anticipating 1% growth in Japan's economy for Q1 2024.
In the UK, while some economists foresee a rebound as more data emerges, others believe the slowdown may persist. Consumer inflation steadied at 4% in January, double the Bank of England's target, though the labor market remained stable, with unemployment at 3.8% and wages rising at 6%.
Meanwhile, the European Central Bank revised down its GDP estimate for 2024 to 0.8%, adding further strain to Germany and potentially Britain as inflation continues to ease.
