UK GDP data released this morning suggests the UK is likely to have entered a recession after months of fluctuations in economic activity.
Britain’s GDP fell by 0.3% in August, with the previous expansion forecast for July revised downward to a contraction of 0.1%.
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“The latest UK GDP figures were disappointing. Rupert Thompson, investment strategist at Kingswood, said economic activity unexpectedly fell by 0.3% in August, compared to July, due to weakness in the manufacturing and energy sectors. growth was revised downward to 0.1%.
He continued to point out that while economic activity is contracting, the Bank of England is not in a position to ease financial conditions to support the economy. Indeed, their next actions could cause further damage to the economy.
“It is very unlikely that this decline will dissuade the Bank of England from raising interest rates as much as 0.75%, or even as much as 1%, at its next meeting on November 3,” Thompson said.
Analysts at Hargreaves Lansdown have painted a perfect storm of adverse economic conditions that will cause a further economic slowdown in 2023.
Sophie Land-Yates, principal equity analyst at Hargreaves Lansdown, said: “Unfortunately, this latest data set suggests that for many people 2023 will feel like a recession and that global economic growth will continue to grow. “This is consistent with the IMF’s recent warning that the worst of the slowdown is yet to come.” .
“There are a number of unhelpful external headwinds that are hampering Britain’s ability to grow the economy.”
“At the same time, the UK consumer class is becoming completely weary of the government’s ability to control things, given political uncertainty, concerns about prolonged high inflation, and public criticism of government policies by the IMF. All of this reduces people’s willingness and ability to spend money within the economy.
Economic conditions are likely to continue to depend on central bank policy, and the UK economy will continue to suffer until the Bank of England signals a rate cut.
