The UK economic system contracted by 0.2% within the third quarter, early official figures present, marking step one in the direction of recession.
The Office for National Statistics (ONS) reported a dip in output for September, leaving gross home product (GDP) – a measure of the well being of the economic system – in detrimental territory for the July-September interval as an entire.
The official definition of a recession is 2 consecutive quarters of detrimental development.
It could be achieved ought to the economic system additionally contract within the present fourth quarter to the 12 months’s finish.
The quarterly contraction was not as unhealthy as had been anticipated.
Economists polled by Reuters had anticipated contraction of 0.5% following the upwardly revised 0.2% development seen within the second quarter of this 12 months.
The outlook was seen as so dire by the Bank of England final week that it declared the UK was already in recession – outlining a state of affairs the place the economic system may contract for eight successive quarters from the third quarter of 2022.
That would make the downturn probably the most protracted since information started although the depth of the plunge could be reasonable compared to that seen after the 2008 monetary disaster.
The downturn is being pushed by the consequences of the value of dwelling disaster.
Costs began rising globally as a result of demand was outstripping provide on the finish of COVID lockdowns.
Then an financial bombshell was to exacerbate the inflation downside as Russia invaded Ukraine in February – forcing up prices of many core commodities equivalent to oil, gasoline, wheat and different meals.
The penalties, which embrace the influence of Western sanctions on Moscow, compelled up costs which have been then handed down provide chains to the buyer.
Rising rates of interest to deal with inflation, not solely within the UK however throughout massive elements of the world, have compelled up borrowing prices to squeeze spending energy much more.
UK debtors have endured extra ache after the Truss authorities’s mini-budget sparked a disaster of confidence within the UK public funds on monetary markets, the injury from which continues to be being felt by mortgage prospects particularly.
A weaker pound has additionally added to inflation as a result of it makes the price of imports costlier.
Commenting on the financial contraction, Chancellor of the Exchequer, Jeremy Hunt blamed Russia’s invasion of Ukraine for driving up inflation.
“We are not immune from the global challenge of high inflation and slow growth largely driven by Putin’s illegal war in Ukraine and his weaponisation of gas supplies,” he stated.
“I am under no illusion that there is a tough road ahead – one which will require extremely difficult decisions to restore confidence and economic stability. But to achieve long-term, sustainable growth, we need to grip inflation, balance the books and get debt falling. There is no other way.”
“While the world economy faces extreme turbulence, the fundamental resilience of the British economy is cause for optimism in the long run.”