The UK economy slipped into the red in August as rampant inflation wreaked havoc – fueling fears a full-blown recession is inevitable.
GDP fell 0.3 percent, much worse than flat analysts had expected, with factories and consumer services firms struggling.
To underscore the country’s grim picture, growth for July was also downgraded to 0.1 percent from 0.2 percent.
The figures mean the economy as a whole is expected to contract in the third quarter, with the Office for National Statistics (ONS) confirming growth of more than 1 per cent would be needed in September to avoid a broader contraction.
The outlook for the current period is similarly bleak, with two straight quarters in which the technical definition of a recession has narrowed.
Chancellor Kwasi Kwarteng stressed that the government’s energy support package and growth plan “will address the challenges we face”.
But the turmoil in financial markets in the wake of his mini-budget has pushed up mortgage rates and put even more pressure on cash-strapped Britons.
GDP fell 0.3 percent in August, much worse than flat analysts had expected, with factories and consumer services firms struggling
The International Monetary Fund (IMF) warned yesterday that the UK economy could contract sharply in 2023 as consumers suffer from inflation and higher interest rates.
It lowered its forecast for UK GDP growth next year to just 0.3% in 2023 from a previous 0.5%.
Mr Kwarteng said: “Countries around the world are currently facing challenges, particularly due to high energy prices caused by Putin’s barbaric actions in Ukraine.
“Our growth plan will address the challenges we face with ambitious supply-side reforms and tax cuts that will grow our economy, create more good-paying skilled jobs and in turn raise living standards for all,” he added.
The ONS said three-month growth slowed further in the three months, with gross domestic product (GDP) falling 0.3 percent in the quarter ended August.
On a monthly basis, the economy is now back to where it was before the pandemic, having been higher earlier in the summer than pre-Covid.
Grant Fitzner, chief economist at the ONS, said: “The economy contracted in August, with both manufacturing and services falling, and with a small downward revision to growth in July, the economy has contracted overall over the past three months.
“Oil and gas production fell as more planned summer maintenance took place in the North Sea than usual.
“Notable declines were also seen in large parts of manufacturing.”
He added: “Sporting events also had a slower month after a strong July and many other consumer-facing services struggled with retail, hairdressers and hotels all performing relatively poorly.
‘On the positive side, these declines were partially offset by stronger than usual summer performance from many professional services such as lawyers, accountants and architects.’
The Bank of England has previously forecast the economy to slip into recession towards the end of the year, forecasting a 0.1 percent contraction for the third quarter.
GDP grew marginally in the second quarter, rising 0.2 percent in the three months to June after being revised upwards.
The latest ONS data showed that manufacturing output fell 1.6 percent in August, while the services sector also fell 0.1 percent.
According to the figures, production of consumer services fell 1.8 percent in August after growing 0.7 percent in July.
The construction sector was the only one of the three main sectors of the economy to post growth of 0.4 percent in August.
Sophie Lund-Yates, Lead Equity Analyst at Hargreaves Lansdown, said: “Investors are awaiting signs that the recession is here and while the UK isn’t there by traditional metrics, today’s announcement brings us a big step closer to that reality. ‘
The International Monetary Fund (IMF) warned yesterday that the UK economy could contract sharply in 2023 as consumers suffer from inflation and higher interest rates
