The UK economy shrank more than expected in September and contracted in the third quarter for the first time since the start of last year, suggesting the country is sliding into a recession.
Gross domestic product, or GDP, fell 0.6 per cent between August and September, the Office for National Statistics said on Friday, a larger drop than the 0.4 per cent forecast by economists polled by Reuters.
With the economy contracting also in August, output fell 0.2 per cent between the second and the third quarter, the first quarterly contraction in more than one year.
The economy is now 0.2 per cent smaller than in February 2020, before the pandemic.
September’s fall in part reflects the extra bank holiday for Queen Elizabeth II’s funeral.
However, the GDP contraction in the third quarter is the result of “continued weakness in household and business confidence, higher inflation, and higher interest rates in the economy”, said Sanjay Raja, economist at Deutsche Bank.
The Bank of England in September forecast the third quarter will be the start of a long recession that will last for two years, reflecting tighter financial conditions and the squeeze on real incomes from higher prices.
In September, output in the services sector fell sharply by 0.8 per cent, while manufacturing production stagnated and construction was up 0.4 per cent.
“The quarterly fall was driven by manufacturing, which saw widespread declines across most industries,” said Darren Morgan, director of economic statistics at the ONS. “Services were flat overall, but consumer-facing industries fared badly, with a notable fall in retail.”
The UK’s quarterly figures contrast with a 0.2 per cent expansion in the eurozone.