UK economic system shrinks in third quarter as recession looms

The UK economic system shrank greater than anticipated in September and contracted within the third quarter for the primary time for the reason that begin of final 12 months, suggesting the nation is sliding right into a recession.

Gross home product, or GDP, fell 0.6 per cent between August and September, the Workplace for Nationwide Statistics mentioned on Friday, a bigger drop than the 0.4 per cent forecast by economists polled by Reuters.

With the economic system contracting additionally in August, output fell 0.2 per cent between the second and the third quarter, the primary quarterly contraction in multiple 12 months.

The economic system is now 0.2 per cent smaller than in February 2020, earlier than the pandemic.

September’s fall partly displays the additional financial institution vacation for Queen Elizabeth II’s funeral.

Nonetheless, the GDP contraction within the third quarter is the results of “continued weak point in family and enterprise confidence, larger inflation, and better rates of interest within the economic system”, mentioned Sanjay Raja, economist at Deutsche Financial institution.

The Financial institution of England in September forecast the third quarter would be the begin of a protracted recession that can final for 2 years, reflecting tighter monetary situations and the squeeze on actual incomes from larger costs.

In September, output within the providers sector fell sharply by 0.8 per cent, whereas manufacturing manufacturing stagnated and building was up 0.4 per cent.

“The quarterly fall was pushed by manufacturing, which noticed widespread declines throughout most industries,” mentioned Darren Morgan, director of financial statistics on the ONS. “Companies had been flat total, however consumer-facing industries fared badly, with a notable fall in retail.”

The UK’s quarterly figures distinction with a 0.2 per cent growth within the eurozone.