The economy unexpectedly contracted in August, contracting 0.3% from the previous month.
Growth in July has also been revised down from 0.2% previously recorded to just 0.1%.
The Office for National Statistics released its latest reading on the UK’s performance, as the government worries about the prospect of a recession in the future, given the toll imposed on demand by the cost of living crisis.
The result for August is worse than expected, since no growth was anticipated, but rather a contraction of the economy.
The contraction is likely to result in a more pronounced slowdown recorded in September.
“August’s negative result should be followed by a more marked drop in September output as the additional bank holiday for the queen’s funeral will have added to the downward pressure on activity,” said Suren Thiru, economic director of ICAEW (Institute of Chartered Accountants of England). and Wales).
Commentators now suspect that the UK is heading into a recession.
“The UK economy is teetering on the brink of recession,” said Yael Selfin, chief economist at KPMG UK. “The current tightening of household finances continues to weigh on growth and has likely caused the UK economy to enter a technical recession from the third quarter of this year.”
Thiru added: “The government has unnecessarily risked a longer recession with any boost from the energy package which is likely to be overshadowed by a sustained reduction in UK output due to persistently high inflation, punishing rate hikes.” interest and acute financial market turbulence”.
“August’s GDP decline is likely to mark the start of a downward trend that will continue well into next year,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
The ONS figures have been dismissed as mere estimates by Jacob Rees Mogg, Secretary for Business, Energy and Industrial Strategy.
The Bank of England’s action to control inflation, through successive increases in interest rates, adds to the cost burden for borrowers.
The Bank’s tightening has put its mandate to control inflation at odds with the agenda of the new Truss administration, which has set an annual economic growth target of 2.5%.
Last month’s mini-budget, which contained energy bill help for homes and businesses along with a series of tax cuts, sent financial markets into turmoil.
The resulting crisis of credibility forced down the value of the pound and raised government borrowing costs to such an extent that the Bank had to intervene.
the International Monetary Fund he warned on Tuesday that the government must ensure its tax and spending plans are in line with the Bank of England’s inflation-fighting mandate.
In other words, the priority should be to tackle inflation rather than increase the price problem through tax rebates to achieve economic growth.
The IMF welcomed the prospect of an earlier-than-expected debt plan from Kwasi Kwarteng, the foreign minister.
That will now be delivered to MPs on October 31 and will contain an independent analysis from the Office of Budget Responsibility.
Responding to this morning’s announcement, Chancellor Kwasi Kwarteng said the UK faces global challenges that his government’s growth plan will address:
“Countries around the world are facing challenges right now, particularly as a result of high energy prices caused by Putin’s barbaric action in Ukraine.
“That’s why this administration acted quickly to implement a comprehensive plan to protect families and businesses from skyrocketing energy bills this winter.
“Our Growth Plan will address the challenges we face with ambitious supply-side reforms and tax cuts, which will grow our economy, create more high-paying, skilled jobs and, in turn, raise living standards for all.”
