The UK economy unexpectedly contracted in August for the first time in two months, raising the risk of a recession.
According to figures released on Wednesday by the Office for National Statistics, GDP fell 0.3% following 0.1% growth in July, and versus expectations of flat reading. July’s growth was revised down from an initial estimate of 0.2%.
The data showed that the UK economy is now 0.5% above its pre-coronavirus level in the fourth quarter of 2019.
Manufacturing production fell 1.6%, while output in the services sector dipped 0.1% and is now 0.2% below pre-Covid levels.
ONS chief economist Grant Fitzner said: “The economy shrank in August with both production and services falling back, and with a small downward revision to July’s growth the economy contracted in the last three months as a whole.”
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “The nation appears to have officially leapt from stagnation to contraction once again, in the latest instalment of the monthly GDP rollercoaster, with economic activity ebbing and flowing erratically for the last nine months.
“This latest data set unfortunately gels with the IMF’s recent warning that 2023 will feel like a recession for many people, and that the worst of the global growth slowdown is yet to come. Investors are waiting for signs that the recession has arrived, and while on traditional metrics, the UK isn’t there yet, today’s announcement takes us one heavy step closer to that reality.”
