- The UK economy shrank by 0.3% in October, figures published by the Office for National Statistics (ONS) show (GDP monthly estimate, UK - Office for National Statistics (ons.gov.uk))
- There were contractions across services, production and construction
- Over the three months to October the economy flatlined
Danni Hewson, head of financial analysis at AJ Bell, comments:
“Awful weather and the disruption caused by strikes won’t have helped, but even with the continued squeeze on consumer spending, the contraction in economic growth recorded in October was greater than had been expected.
“All sectors of the economy were affected as the impact of two years of interest rate hikes work their way through the system. The big question is whether October is the harbinger of recession or a tipping point as wage growth finally surpasses inflation?
“No one expects the Bank of England to do anything other than hold firm on rates as it continues the fight to bring inflation back down to that elusive 2% target. But the economy is weakened, treading water until such a time as those rate hikes can start to be unravelled.
“Why build houses if people will struggle to afford mortgages? Why open seven days a week if you can only fill your restaurant at weekends? Why invest in a new production line if you won’t get enough customers to buy your product – at least at the price you want to sell it at?
“Some of the factors responsible for the dismal economic performance in October won’t be repeated. Screen writers and actors have ended their walkout, which means action can resume on sets that had been dark. Consultants have reached a deal with the government, which could mean an end to at least some of the disruption that’s crippled the NHS. And people are finally getting to a checkout and finding their weekly shop has only gone up by a few pennies, rather than the pounds they’ve come to expect.
“But even if the UK does continue to dodge recession, real growth is likely to prove elusive for at least the next year.”
Source: ONS
