The week ahead 13 February 2023 - UK avoids recession for now
![](https://www-cdn01.avisonyoung.com/cdn-cgi/image/q=85/documents/38901/193266746/The-Week-Ahead-2022.png/e3e81fcb-00b5-94cd-c601-f04f4af3188e?t=1711547198587)
What to watch out for in the UK economy and property market this week.
Last week saw further examples of economic data that could not be described as ‘good’ but was better than many feared. Just over a month ago, it was widely assumed that the UK was in a recession in the second half of 2022 – indeed the Chancellor of the Exchequer said just that in his Autumn Statement. However, Friday saw a far more nuanced set of GDP figures released, with the economy stagnant in Q4, thus avoiding the recession label, at least for now. There was even some marginal growth if you add enough decimal places: 0.014%. The figures also showed a worse than expected month-on-month contraction during December. Meanwhile, Germany also produced some similarly ambiguous economic data, with inflation falling in January on the HICP index, but rising on the CPI measure, which are calculated differently.
Examining the underlying data for UK GDP reveals an economy that is struggling to grow, which makes a recession in 2023 seem likely. In the services sector, the industries that normally drive growth – finance, science and the professions, and information and communication – all contracted in Q4. The strongest growth came from administration and support services, which is not a prominent sector in the economy and might just be experiencing a one-off surge. On the plus side, construction output grew in Q4 thanks to infrastructure projects. There was a similar murkiness surrounding the German inflation figures, where core inflation nudged up. In summary, it is good that the economic indicators are less bad than expected, but they still portray an economy that is struggling with high inflation and subdued business activity.
Tomorrow sees the release of the MSCI UK monthly property index. Between June 2022 and December the capital growth index fell by nearly -20%, and we are expecting a decline of another -5% to be reported for January 2023. We believe a correction of this size is likely to start drawing opportunist investors off the side lines; although given property deals (from initial due diligence to completion) take months, it will be some time yet before the evidence comes through in the sales volume data.
Things to watch for this week
Tuesday 14th February
MSCI Capital Value Index, January
Previous: -3.7% m-on-m
Forecast: -5.0%
With the economy stagnant, interest rates high and sales volumes ebbing, our forecast is for capital values to fall further in January.
Germany ZEW Economic Sentiment Index, February
Previous: 16.9
Forecast: 25.0
The index returned to positive territory in January, as the feared power cuts did not materialise and supply chain difficulties eased. We believe falling inflation will lift sentiment in February.
Wednesday 15th February
UK CPI Inflation, January
Previous: 10.5%
Forecast: 10.3%
Given the sharp drop in energy prices in recent months, another decline in headline inflation is forecast. However, the Bank of England will be closely watching core inflation, and an increase would reawaken talk of another rate hike.
![](/documents/49413923/49415301/James-Roberts-2021.jpg/43f1a71f-51ea-4eb7-a8b0-1b9e03d8f698?t=-1536905918)