The Office for National Statistics reports that GDP fell in the July-September quarter, after rising 0.2% in April-June. This is less bad than feared, but still shows that the UK economy is weakening as the cost of living crisis and rising interest rates hit the economy. Updated at 07:35 GMT Important events BETA filters Key facts (8) United Kingdom (10) Office for National Statistics (7) Liz Truss said in August that a recession was not “inevitable”. Her actions made a bad situation worse and this morning Jeremy Hunt is pretty much throwing in the towel. Next week, he will attempt to “balance the books and reduce the debt” without prolonging the recession + deeper pic.twitter.com/e6D4bcXj3f — Joel Hills (@ITVJoel) November 11, 2022
Hunt: tough road ahead
The news that the UK economy is halfway into recession is more disappointing ahead of next week’s autumn statement. Chancellor Jeremy Hunt blamed the invasion of Ukraine and the “weaponisation” of gas suppliers by Russia for hitting growth and pushing up inflation. Hunt also warns that there is a “tough road ahead” and some “extremely difficult decisions” (a sign that he is determined to cut spending and raise taxes, even though this will hurt the economy). Hunt says: “We are not immune to the global challenge of high inflation and slow growth driven in large part by Putin’s illegal war in Ukraine and weaponization of natural gas supplies. “I am under no illusion that there is a difficult road ahead – one that will require extremely difficult decisions to restore confidence and economic stability. But to achieve long-term, sustainable growth, we need to contain inflation, balance the books and get the debt down. There is no other way. “While the global economy faces extreme turbulence, the fundamental resilience of the UK economy is cause for optimism in the longer term.” “We are not immune to the global challenges of high inflation and slow growth driven in large part by Putin’s illegal war in Ukraine and the weaponization of natural gas supplies.” Chancellor @Jeremy_Hunt responds to today’s GDP statistics from the @ONS. pic.twitter.com/me9Rt54f59 — HM Treasury (@hmtreasury) November 11, 2022
UK economy smaller than before Covid
The UK economy is smaller than it was before the start of the Covid-19 pandemic. GDP was estimated to be 0.2% below its pre-coronavirus levels in February 2020, after GDP fell by 0.6% in September. UK GDP growth to September 2022 Photo: ONS In contrast, the US economy returned to its pre-Covid levels in mid-2021 (although its GDP then fell in the first half of 2022). Updated at 07:32 GMT Reuters found the ONS revised earlier GDP figures to show the economy was in better health over the summer: Gross Domestic Product data for August was revised to show a marginal contraction of 0.1% compared to the initial reading of a contraction of 0.3%, and GDP in July was now seen to have increased by 0.3%, versus a previous estimate 0.1%.
ONS: Fall in GDP driven by manufacturing
The fall in UK manufacturing in the last quarter sent the economy into a tailspin, says ONS director of economic statistics Darren Morgan: Morgan also points to a “significant” drop in retail activity – a sign that the cost of living crisis has hit consumer spending. “With September showing a marked decline partly due to the impact of the extra bank holiday for the Queen’s funeral, overall the economy shrank slightly in the third quarter. “The quarterly decline was driven by manufacturing, which saw a widespread decline across most industries. “Services were solid overall, but consumer-facing industries fared poorly, with a notable decline in retail.” GDP fell 0.6% in September, following a revised 0.1% drop in August 📉 This is due to the decline in consumer-facing industries, which were affected by the additional bank holiday for Her Majesty Queen Elizabeth’s State Funeral. ➡️ pic.twitter.com/voK3k25wBT — Office for National Statistics (ONS) (@ONS) November 11, 2022
UK manufacturing output fell
UK factories had another rough quarter. Output fell 1.5% in July-September, the fifth straight quarter of contraction. This was driven by a 2.3% drop in manufacturing output – with all 13 manufacturing sub-sectors shrinking. Manufacturers fared better – manufacturing output rose 0.6%, a slowdown from the previous quarter, as new orders rose in the quarter. Updated at 07:13 GMT
The service sector stopped as a state funeral
The UK services sector was flat in the July-September quarter, with no growth. This was partly due to the government funeral – services output fell 0.8% in September, after rising 0.1% in August and 0.5% in July. Photo: ONS The ONS says around half of the 0.6% fall in activity in September was due to the bank holiday. Unlike regular holidays, there was no shift in leisure and tourism activities due to the widespread nature of business closures. So while it is very difficult to separate the impact of bank holidays from other factors affecting the economy, we estimate that at least half of this month’s fall in GDP is due to this bank holiday. Updated at 07:28 GMT The UK economy shrank in the last quarter Photo: ONS
The economy shrank 0.6% in September
In September alone, the economy shrank by 0.6%. Growth was affected by the bank holiday for Queen Elizabeth II’s state funeral, with some businesses closed or operating differently on the day, the Office for National Statistics said. Updated at 07.06 GMT
UK economy shrank 0.2% in third quarter – putting it on brink of recession
Newsflash: The UK economy shrank by 0.2% in the last quarter, bringing it to the brink of recession. The Office for National Statistics reports that GDP fell in the July-September quarter, after rising 0.2% in April-June. This is less bad than feared, but still shows that the UK economy is weakening as the cost of living crisis and rising interest rates hit the economy. Updated at 07:35 GMT The rise in people unable to work due to ill health has also hit the UK economy. Half a million people have left the workforce in the past three years because they suffer from a long-term illness. Lock-related injuries are a factor – there has been a large increase in the number of people unable to work due to neck and back problems caused by working at home. And with NHS waiting lists at record levels, those who need help face long waits to receive treatment. Britain’s declining health is holding back economic growth for the first time since the Industrial Revolution after years of underinvestment in services, Andy Haldane warned this week. The chief executive of the Royal Society of Arts (RSA) said more than a century of progress in health and wellbeing had backfired, with a direct impact on the economy and emergency living costs. “We are in a situation for the first time, probably since the Industrial Revolution, where health and well-being are in decline,” he said. “Having been an accelerator of prosperity for the past 200 years, health now acts as a brake on the rise of growth and well-being of our citizens.” Today’s UK third-quarter GDP report is expected to “highlight the folly” of what is likely to emerge from the Chancellor of the Exchequer next week, says CMC Markets’ Michael Hewson. As he points out, tax increases and spending cuts could be counterproductive: Today’s figures are expected to see a sharp contraction of -0.5%, with the outlook for the fourth quarter unlikely to be much better, and yet next week the UK government is set to cut spending and increase taxes to cover what the OBR says is a fiscal black hole of around £40bn, depending on various assumptions about interest rates, inflation and growth. It’s certainly an alarming number, but I’m not sure the measures next week will do anything to close that gap. If anything, they could make things worse at a time when the economy is slowing sharply. Today’s GDP report could signal the start of a deep and long recession, fears Deutsche Bank UK economist Sanjay Raja. It told clients earlier this week that UK GDP probably fell by 0.6% in July-September (Q3). The fall in third-quarter GDP reflects continued weakness in household and business confidence, higher inflation and higher interest rates in the economy, with household consumption contracting in the quarter, business investment slowing and government spending falling further. Raja added that a recession in the fourth quarter can no longer be ruled out, with the economic outlook weakening further. Headwinds to the UK economy will almost inevitably push the economy into recession, with global growth slowing, confidence deteriorating and persistently high inflation and rising interest rates further squeezing disposable incomes.
Introduction: UK GDP report could show recession looming
Good morning and welcome to our rolling coverage of business, financial markets and the global economy. This morning we find out whether the UK economy is headed for recession when the first estimate of GDP for the final quarter is published at 7am. Economists forecast the economy shrank in the July-September quarter, with activity falling by about 0.5 percent, as businesses and households grappled with rising inflation and higher borrowing costs. Rising UK energy bills this year have hit disposable income, leaving households with less to spend on other goods and services, as well as businesses. A technical recession is defined as two quarters of contraction in a row, so this would put the UK on the brink of a painful recession. The Bank of England warned last week that the UK could fall into its biggest recession in a century. It is almost inevitable that the economy will contract in the third quarter,…
