Britain may have already entered recession as the latest economic data showed the economy shrank in the reporting quarter between July and September.
In its estimate of UK gross domestic product (GDP) in the third quarter, data published on Friday by the Office for National Statistics (ONS) revealed the economy shrank by 0.2%.
Over this time period, the services sector slowed to a completely flat output, while the manufacturing sector shrank by 1.5%, partly due to declines in all 13 manufacturing subsectors.
The director of economic statistics at the ONS, Darren Morgan, told the BBC that customer-facing businesses such as shops have also been “hit hard” as the cost of living crisis has seen people cut back on their spending habits. He went on to say that businesses are also facing difficulties due to rising raw material prices as well as increased energy costs.
The fall was sharper in September, which fell 0.6%, but the statistics office attributed this to the bank holiday around Queen Elizabeth II’s state funeral, during which many businesses were either closed or operating on a part-time basis.
GDP fell by 0.2% in Q3 (July to September) 2022 with:
▪️ fixed services (0.0% increase)
▪️ 2.3% drop in manufacturing
▪️ 0.6% increase in constructions
➡️ https://t.co/IsdBc7KmAM pic.twitter.com/lwcKVBUOOC
— Office for National Statistics (ONS) (@ONS) November 11, 2022
The figures come after the Bank of England predicted last week that the UK is likely to enter its biggest recession in a hundred years. The central bank predicted the recession would last until mid-2024, upping its previous estimates of a 15-month recession.
The ONS figures match forecasts, which suggest the recession will officially begin in the third quarter of this year. However, since a recession is usually defined as two consecutive quarters of negative growth, a declaration would not be made until GDP numbers from the final quarter of the year confirmed that the economy contracted again.
The Bank of England, which raised interest rates last week to 3 percent in a bid to fight inflation, will likely need to raise rates again to 4.75 percent in order to bring inflation back to its 2 percent target , according to the National Institute for Economic and Social Research.
This means mortgage payments are likely to see their payments rise again and Rishi Sunak’s government plans to introduce more tax increases.
While Britain’s central bank was caught flat-footed in its inflation forecasts and the clear fallout from decisions to repeatedly lock down the country during the Chinese coronavirus crisis, the Bank of England sought to blame the current inflation woes on Britons taking early retirement.
The bank’s chief economist Huw Pill claimed the rise in early retirements was putting increased pressure on employers, saying: “This is a real shock to the economy, not something monetary policy can prevent.”
High inflation could last years, former Central Bank chief economist admits https://t.co/Rqa5SUI9GK
— Breitbart London (@BreitbartLondon) May 10, 2022
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