ENGLAND — UK on the Brink of Recession After the Economy Contracts by 0.2% in the Third Quarter of 2022, the U.K. GDP shrank by 0.2%, potentially indicating the beginning of a protracted recession.
According to the preliminary assessment, the economy did better than anticipated in the third quarter despite the recession. Definitive reported that analysts had predicted a 0.5% decline in economic activity.
Since the 0.1% decline in the second quarter was revised up to a 0.2% rise, the contraction does not yet constitute a technical recession, which is defined as two consecutive quarters of negative growth.
According to the Office for National Statistics report released on Friday, “in terms of output, there was a slowing on the quarter for the services, production, and construction industries. The services sector slowed to flat output on the quarter driven by a decline in consumer-facing services, while the production sector fell by 1.5% in Quarter 3 2022, including falls in all 13 sub-sectors of the manufacturing sector.
The Bank of England predicted this week that the current slump, which started in the third quarter, would likely persist well into 2024 and raise unemployment to 6.5% over the following two years, making it the country’s longest recession since records have been kept.
Because of the nation’s historically high cost of living, real earnings are being squeezed by rising energy and tradeable goods costs. In an effort to control double-digit inflation, the central bank has increased interest rates by the most since 1989.
According to the ONS, the third quarter’s quarterly GDP was 0.4% lower than the last quarter of 2019’s pre-Covid level. In the meanwhile, the statistics for September, when the U.K. The public holiday for Queen Elizabeth II’s state funeral caused a 0.6% decline in GDP.
The new fiscal policy agenda, which is anticipated to contain significant tax increases and spending reductions, will be announced by UK Finance Minister Jeremy Hunt the following week. To stabilize the nation’s economy, Prime Minister Rishi Sunak has cautioned that “tough decisions” will need to be made.
According to George Lagarias, chief economist of Mazars, “although certain headline inflation data may begin to look better from here on, we expect prices to remain excessive for some time, adding extra pressures on demand.”
Consumption will likely be further curtailed if next week’s budget proves to be as “tough” for taxpayers as anticipated, and the Bank of England should start thinking about the effects of a demand shock on the economy.
Because it’s breaking news, this article will be updated shortly.