The UK economy shrank faster than previously thought in the third quarter, according to the latest figures from the Office for National Statistics (ONS).
UK gross domestic product (GDP) fell 0.3% between July and September, a downward revision from a first estimate of a fall of 0.2%, as the country remained on the brink of a recession.
GDP fell 0.3% in Quarter 3 (July to Sept 2022), revised down from a 0.2% fall, with:
▪️ services at 0.1% (revised up from 0.0%)
▪️ manufacturing at -2.8% (revised down from -2.3%)
▪️ construction at -0.2% (revised down from 0.6%)
— Office for National Statistics (ONS) (@ONS) December 22, 2022
“The data confirms expectations that the UK economy is heading towards a recession given the downward revision to the latest quarterly GDP figure,” according to Victoria Scholar, head of investment at interactive investor.
Gabriella Dickens, senior economist at Pantheon Macroeconomics, agreed: “Looking ahead, the UK likely will continue to underperform; we expect Britain to suffer the deepest recession among major advanced economies in 2023, due to the severity of the headwinds from both monetary and fiscal policy.”
“We expect a 2% peak-to-trough fall in GDP, leading a year-over-year decline of 1.5% in 2023.”
In output terms, the services sector grew by 0.1% while the production sector fell by 2.5% in the quarter, including falls in all 13 manufacturing sub-sectors, as well as a fall in the construction sector of 0.2%.
The level of real GDP in quarter three 2022 is now estimated to be 0.8% below where it was pre-coronavirus at quarter four (October to December) 2019, downwardly revised from the previous estimate of 0.4%.
Dickens pointed out the figures confirmed “that the UK was the only G7 economy in which quarter three GDP still was below its pre-Covid level.”
“Indeed, GDP in the UK was 0.8% below its quarter four 2019 level, whereas it was 4.3% above in the US, 2.7% above in Canada, 1.8% in Italy, 1.1% in France, 0.9% in Japan and 0.3% in Germany,” she noted.
The implied GDP deflator rose by an upwardly revised 6.4% in the year to quarter three 2022, primarily driven by an 9.2% increase in the implied price of household consumption.
The household saving ratio increased strongly to 9.0% in quarter three 2022, from 6.7% in the previous quarter.
But real households' disposable income fell by 0.5% this quarter; the fourth consecutive quarter of negative growth.