Britain's economy contracted in the third quarter, with a downward revision from the previous quarter suggesting the country may be stuck in a period of subdued economic performance.
The U.K.'s gross domestic product fell 0.1% quarter-on-quarter in the July-September period, according to Office for National Statistics data released on Friday, below the level of flat growth previously published in November.
Economists surveyed by the Wall Street Journal had also expected growth to stagnate in the third quarter compared to the previous quarter.
Additionally, the ONS revised down its second quarter GDP figures, now saying there was no growth, after previously saying the economy grew by 0.2%. This meant the UK narrowly avoided a technical recession in the middle two quarters of 2023, defined as two consecutive three-month periods of negative growth.
“The economy contracted slightly in the third quarter, when we had previously reported no growth. Subsequent results from our business survey showed that film production, technology and design and telecommunications all performed slightly worse than we initially thought,” ONS Director of Economic Statistics said. Darren Morgan said.
“However, the overall picture remains one of an economy that has changed little over the last year,” he added.
Data now suggests a mild recession may have begun, British economist Ashley Webb of Capital Economics said in a research note.
“But whether there is a small recession or not, the overall picture is that we expect real GDP growth to remain subdued throughout 2024,” he said.
According to the data, economic output in the three months to September was hit by a 0.2% decline in the services sector, offsetting a 0.4% increase in construction output and a 0.1% increase in the manufacturing sector.
Consumer spending fell 0.5% from the previous quarter, despite a 0.4% rise in real disposable income, as higher Bank of England interest rates likely depressed consumption and prompted households to increase their savings.
Weaker economic conditions could raise the prospect of earlier BOE rate cuts as signals of a slowing economy become stronger. Inflation was also lower than expected in data released earlier this week, although strong wage growth continued to put pressure on prices.
The central bank said in November it expects growth to stagnate in the second half of 2023.
The updated figures mean GDP in Q4 2019 was just 1.4% above pre-pandemic levels, down from the previously estimated 1.8%, with only Germany among G-7 countries recording weaker growth.
Write to Ed Frankl at [email protected]
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