THE UK is heading into an expected recession as the economy shrank between August and October.
The economy contracted by 0.3% during the three months as the soaring cost of living hit businesses and households.
Over the period, activity in the UK slowed across all the main sectors, including production, construction and services.
The UK is widely expected to be in a recession by the end of this year. This occurs when the economy shrinks for two consecutive three-month periods.
There was some brief respite in October when the economy grew by 0.5% according to the Office for National Statistics (ONS).
However Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, downplayed this as a "false dawn".
Chancellor Jeremy Hunt said: “While today’s figures show some growth, I want to be honest that there is a tough road ahead.
“Like the rest of Europe, we are not immune from the aftershocks of Covid-19, Putin’s war and high global gas prices.”
The Bank of England is still working to rein in sky-high inflation that is weighing on growth and is set to hike interest rates again on Thursday.
Darren Morgan, ONS director of economic statistics, said: “The economy bounced back in October, recovering from the impact of the additional bank holiday for the state funeral.
“In particular, car sales rebounded after a very poor September, while the health sector also saw a strong month, with GP appointments, A&E attendance and the Covid-19 autumn booster campaign all driving up the sector.
“Construction continued its strong trend over the last year and stands at its highest level on record, with new housebuilding driving growth this month.
“However, over the last three months as a whole the economy shrank, with falls seen across services and manufacturing.”
Samuel Tombs, chief economist at Pantheon Macroeconomics, is predicting the UK to have officially entered a recession – as defined by two quarters in a row of falling output – by the end of the year.
GDP already shrank in the third quarter of 2022.
He said: “We think that GDP will fall by about 0.3% month-to-month in both November and December, leaving it down 0.2% on a quarter-on-quarter basis.”
He added: “The Government looks set to pull back energy price support substantially next year, while higher interest rates will squeeze disposable incomes and spur households and businesses to pay off debt.
“As a result, we continue to expect a peak-to-trough fall in the quarterly measure of GDP of about 2%, and doubt that the economy will grow again until early 2024, resulting in a deeper and longer recession than we envisage for all other G7 economies.”
