Updated official data shows UK GDP contracted by 0.3% in July-September, worse than previously thought
The 0.3% quarter-on-quarter fall in GDP in Q3 will probably now mark the start of a recession that will see GDP shrink by 2.5% and last until Q3 2023, predicts Thomas Pugh, economist at audit, tax and consulting firm RSM UK.
He warns that weak
Admittedly, there are signs that the economy bounced back a little in Q4. GDP rose by 0.6% m/m in October and the RSM UK MMBI and the S&P Global Composite PMI both rebounded in Q4.
But the economy almost certainly worsened again in November and December as colder weather and higher inflation continued to bite.
Much of the domestic weakness was offset by a surge in exports of 8.9% q/q, but given the global economy is likely to fall into a recession next year, exports can’t be relied upon for much longer.
“UK final Q3 GDP fell to -0.3% versus the preliminary estimate of -0.2% and expectations for -0.2%, negatively impacted by the additional bank holiday day for Queen Elizabeth’s funeral. The services sector grew by 0.1% but the production sector shrank by 2.5% with real GDP now 0.8% below its pre-pandemic levels, revised down from a previous estimate of 0.4%. Real household disposable income suffered the fourth consecutive quarter of negative growth falling 0.5% in Q3. However the household saving ratio increased to 9% versus 6.7% in the previous quarter.
The data confirms expectations that the UK economy is heading towards a recession given the downward revision to the latest quarterly GDP figure. While the service sector output was revised slightly higher, construction swung into negative territory and manufacturing was revised lower. All three sectors have been trending lower underscoring the widespread impact from the broad-based macroeconomic headwinds.
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