Recession fears returned today after third quarter GDP was revised down to a fall of 0.1% in a major blow for Rishi Sunak.
The Office for National Statistics (ONS) had previously said that output was flat during the July to September period but have now tweaked their estimate downwards after poring over more data.
It means that the UK economy is half way to an official recession, which is defined as two consecutive quarters of negative growth.
The fourth quarter got off to a bad start with GDP in October dropping by 0.3%.
The ONS also today downgraded second quarter growth from 0.2% to flat meaning that the economy only missed recession by a statistical whisker over the spring and summer
The revised figure means that it will be hard for the Prime Minister to claim that he has met his start of the year pledge to get the economy growing.
Today’s data show that the dominant services sector fell by 0.2%, more thsan offsetting a 0.4% rise in construction and a 0.1% increase in the production sector, which includes manufacturing.
Chancellor of the Exchequer Jeremy Hunt said:
“The medium-term outlook for the UK economy is far more optimistic than these numbers suggest. We’ve seen inflation fall again this week, and the OBR expects the measures in the Autumn Statement, including the largest business tax cut in modern British history and tax cuts for 29 million working people, will deliver the largest boost to potential growth on record.”
Shadow Chancellor Rachel Reeves said: “Rishi Sunak is a prime minister whose legacy is one of failure. He failed to beat Liz Truss, he failed to cut waiting lists, he failed to stop the boats and now he has failed to grow the economy.
“Thirteen years of economic failure under the Conservatives have left working people worse off, with higher bills, higher mortgages and higher prices in the shops."
Richard Carter, head of fixed interest research at Quilter Cheviot, said “Growth is weakening and interest rates are really beginning to bite and while a recession has just been avoided to date, there is no guarantee one will be avoided in 2024. You just have to look at October’s -0.3% reading to see that growth istrending further in the wrong direction.
"Inflation has eased more than anticipated and interest rate predictions are suggesting more easing thanoriginally thought in 2024, but the damage may already have been done. Certainly, Rishi Sunak’s pledge to grow the economy is now severely in doubt."
Ashley Webb, UK economist at City forecasters Capital Economics, said: “The 0.1 per cent quarter-on-quarter fall in real GDP in the third quarter may mean that the mildest of mild recessions started in Q3. But whether or not there is a small recession, the big picture is that we expect real GDP growth to remain subdued throughout 2024.”
