The UK is not in a technical recession, it has been revealed, as the economy grew slightly during the second quarter after a previous predicted decline.
According to the Office for National Statistics (ONS) on Friday, gross domestic product (GDP) grew by 0.2% over the three months to June.
It had previously been estimated that the economy shrank by 0.1% over the period, but the UK economy was driven by upwards improvements for the health and financial sectors.
A technical recession is when the economy sees two consecutive quarters of decline.
"These improved figures show the economy grew in the second quarter, revised up from a small fall,” ONS chief economist Grant Fitzner said.
“They also show that, while household savings fell back in the most recent quarter, households saved more than we previously estimated during and after the pandemic.”
However, economists have pointed to the fact that the real test is yet to come.
“The full extent of sky-high inflation and now increased borrowing costs will only begin to be truly felt in the second half of the year,” AJ Bell financial analyst Danni Hewson said.
“Even with the government’s energy support package many households will see their bills shoot up, leaving them less cash to pay for any of those discretionary goods and services that help UK PLC soar.”
Watch: How does inflation affect interest rates?
The ONS also added that the economy’s overall size is still smaller than previously estimated, 0.2% below its pre-pandemic level. It was previously thought that it was 0.6% bigger than before COVID-19 struck.
The British economy is also estimated to have shrunk by 11% during the first year of the pandemic, rather than 9.3% as previously thought.
Paul Dales, chief UK economist at Capital Economics, said: “The good news is that the economy is not already in recession. The bad news is that contrary to previous thinking, it still hasn’t returned to pre-pandemic levels. It’s the only G7 economy in that situation and it makes the chancellor’s fiscal plans look even more untenable.
Meanwhile, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “The downturn in economic activity during 2020 looks even worse than previously thought, and the subsequent recovery even weaker, following the latest set of national accounts revisions.
“These revisions will compel the OBR to revise down further its estimates for future potential GDP, though as they also imply that the tax-to-GDP ratio is higher than previously estimated, the impact on the public finances should be modest.”
Watch: What is a recession and how do we spot one?