Business Live: UK Economy Remains Stagnant with Zero Growth in the Last Quarter
UK economy stagnated in third quarter of 2023
Newsflash: The UK economy stagnated in the last quarter.
The Office for National Statistics has just reported that GDP was unchanged in July-September, compared to the previous quarter.
That’s slightly better than the 0.1% contraction expected by City economists, but shows the economy flatlined over the summer.
The ONS says that the services sector shrank slightly, while construction expanded a little:
Key events
Real estate and transport & storage shrank
The UK’s service sector contracted by 0.1% in the last quarter, driven by a drop in activity in the real estate sector, and in transportation and storage.
That shows the impact of higher interest rates on the economy, leading to a drop in house sales.
The ONS says:
The largest contributions to the fall were from a decline of 0.4% in real estate activities and a 1.2% fall in the transportation and storage subsector.
Within real estate activities, the largest fall was in buying and selling, renting and operating of owned or leased real estate, which fell by 1.6%. Within transportation and storage, there were falls in five out of six of the industries.
The zero growth recorded in July-September is the UK’s worst quarterly performance in a year, since the economy contracted in Q3 2022.
UK GDP: the main points
Here are the key points from this morning’s assessment of the UK economy.
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UK gross domestic product (GDP) is estimated to have shown no growth in Quarter 3 (July to Sept) 2023, following an increase of 0.2% in the previous quarter.
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GDP is estimated to have increased by 0.6% in Quarter 3 2023 compared with the same quarter a year ago.
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In output terms there was a 0.1% fall in the services sector, which offset a 0.1% increase in construction output and broadly flat output in the production sector.
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In expenditure terms, an increase in the volume of net trade was offset by falls in business investment, household spending and government consumption.
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Compared with the same quarter a year ago, the implied GDP deflator rose by 7.9%, largely reflecting a fall in the implied price of imports, which contributes positively to the implied GDP deflator.
UK economy stagnated in third quarter of 2023
Newsflash: The UK economy stagnated in the last quarter.
The Office for National Statistics has just reported that GDP was unchanged in July-September, compared to the previous quarter.
That’s slightly better than the 0.1% contraction expected by City economists, but shows the economy flatlined over the summer.
The ONS says that the services sector shrank slightly, while construction expanded a little:
Emma Wall, head of investment analysis & research at Hargreaves Lansdown, predicts UK GDP was flat over the last quarter.
But the more important issue is the economic outlook, she argues, with several economists predicting a small uplift in the fourth quarter (thanks to Christmas and Diwali).
But then, the economy is seen “retracting” in 2024.
Wall told Radio 4’s Today programme:
There are predictions that we will enter a recession next year, albeit most are saying it will be a soft landing, but still a technical recession.
Today’s UK GDP report will provide “cold comfort”, even if the economy avoids shrinking, predicts Ben Laidler, analyst at trading and investment platform eToro.
The economy may skirt recession for a further quarter, as the still resilient consumer offsets the manufacturing recession, however it will be a sixth straight quarter of no-growth economic stagnation and near all the lead indicators, from the sub 50 PMIs to 5.25% interest rates, point to a modest recession around the corner.
“It feels like the calm in the eye of the economic storm before the buckling economy pulls inflation down and allows the Bank of England to cut interest rates.”
If UK GDP shrank in July-September, it would be the first quarterly decline in a year (unless older data is revised today!).
As this chart shows, the economy is thought to have grown by 0.3% in January-March, slowing to 0.2% in April-June, below the long-term trend growth.
Michael Hewson, chief market analyst at CMC Markets UK, says:
Having got off to a better-than-expected start to 2023, the UK economy looks set to slow sharply in H2 [the second half of the year], given the combined pressures from higher rates as well as higher prices.
There’s been a lot of headlines about how inflation has been slowing in the last few months however it should also be noted that food prices are still rising at close to double digit levels so the squeeze on incomes is still happening albeit at a slower rate, even as the energy price cap has slowly fallen.
Introduction: UK GDP report may show shrinking economy
Good morning.
We’re about to learn how the UK economy performed over the summer, and it may show the country went in reverse last quarter.
At 7am, the Office for National Statistics will release its first estimate of UK GDP for July-September.
Economists predict the economy contracted slightly over the quarter, with GDP forecast to have fallen by 0.1%.
That would put the UK on the brink of a technical recession (two quarterly contractions in a row), as high interest rates and painful price rises hit the economy.
Previous data has shown the economy shrank in July, as wet weather and strikes hit the economy, before a modest recovery in August
The economy is expected to have stagnated in September (we’ll get a monthly breakdown at 7am too).
Earlier this week, analysis from Bloomberg Economics showed there was a 52% chance that the UK was currently in a mild recession.
They predict the economy would shrink in both July-September and October-December, as soaring interest rates and rising unemployment hit household spending.
Deutsche Bank’s chief UK economist, Sanjay Raja, says:
We see September GDP just about flatlining. Services activity, we think will end Q3 flat, with the construction sector contracting for a second consecutive month. Risks are skewed to a lower print too, with our nowcast showing a marginally negative distribution.
If our forecasts are broadly in line, Q3-23 GDP will likely shrink by 0.1% q-o-q. This is consistent with our quarterly nowcast indicators which point to falls in household consumption, business investment, and government consumption.
The agenda
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7am GMT: UK GDP report for July-September
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7am GMT: UK trade report for September
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12.30pm GMT: European Central Bank president Christine Lagarde speaks at Financial Times’ Global Boardroom 2023
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1pm GMT: Russian trade balance
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3pm GMT: University of Michigan’s index of US consumer confidence
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