MercoPress. South Atlantic News Agency

UK economy contracts more than expected in the third quarter

The services sector grew its output by 0.1% while the production sector dropped by 2.5%, during the July to September period

The UK economy heading for recession, contracted more than expected in the third quarter with GDP falling 0.3% against an estimated 0.2%, according to the Office for National Statistics.

The services sector grew its output by 0.1% while the production sector dropped by 2.5%, during the July to September period. Statisticians now believe the level of real GDP in the third quarter is 0.8% below its pre-coronavirus level in the fourth quarter of 2019, lower than a previous estimate of 0.4% below.

Revisions from the ONS have revealed the UK’s growth to be 0.6% in the first quarter, compared to an initial estimation of 0.7%. Growth was put down as 0.1% in the second quarter, versus an earlier estimation of 0.2%.

Darren Morgan, director of economic statistics at the ONS, said that the figures revealed that the “economy performed slightly less well over the last year than we previously estimated, with manufacturing and electricity generation notably weaker.

“Household incomes continued to fall in real terms, albeit at a slower rate than in the previous two quarters, while – taking account of inflation – household spending fell for the first time since the final Covid-19 lockdown in the spring of 2021.”

The FTSE 100 and FTSE 250 were relatively unscathed by the ONS update, “largely because a UK recession has already been priced in,” according to Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“The hoped-for Santa rally is running merrily through markets, but it may end up being a short-lived ride given the cost-of-living winds swirling, the confirmation that the UK is rolling into recession and worries about global economic growth,” she added.