, said: 'With September showing a notable fall partly due to the effects of the additional bank holiday for the Queen's funeral, overall the economy shrank slightly in the third quarter. 'The quarterly fall was driven by manufacturing, which saw widespread declines across most industries. Services were flat overall, but consumer-facing industries fared badly, with a notable fall in retail.' The situation is expected to get worse into the winter as inflation is in double digits, household energy bills went up again in October, and interest rates are rising steeply. Another contraction in the final three months of the year would put the UK into an official recession, which is usually defined as two consecutive quarters of declining GDP. Yael Selfin, chief economist at KPMG UK, said the figures marked the start of a 'prolonged recession'. She said: 'Interest rate rises and the prospect of the Bank of England raising them even further could exacerbate the stalemate in the UK housing market, causing more pronounced cutbacks in spending. 'In addition, a turn to a more austere fiscal policy expected from next week's Autumn Statement could contribute to prolonging any downturn.' Growth in services output, which is the dominant sector in the economy, ground to a halt in the third quarter. On a monthly basis, it went into reverse in September. Industries including retail and wholesale and arts, entertainment and recreation declined in the three-month period. A key cause is the mounting pressure on family finances, as rising bills leave less money to spend elsewhere. Household spending, a key driver of growth, fell by 0.5pc on the quarter once adjusted for the jump in prices. Manufacturing output tumbled by 2.3pc, as every type of factory, from those producing metals and machinery to those making pharmaceuticals or electricals, went into reverse. Construction output increased by 0.6pc com){kind=link}
UK only G7 nation so far to report a drop in GDP in the third quarter
The economy shrank by 0.2pc in the third quarter of the year, beginning what is expected to be a prolonged recession stretching on for as much as two years.
GDP dropped by 0.6pc in September alone in part because of the extra bank holiday for the late Queen’s funeral, while rising energy costs and other prices were already hammering family and business finances.
It leaves the economy 0.4pc smaller than it was before the pandemic and means Britain is spearheading the world’s fall into recession, as the only G7 nation so far to report a contraction in the third quarter.
Darren Morgan, director of economic statistics at the Office for National Statistics (ONS), said: “With September showing a notable fall partly due to the effects of the additional bank holiday for the Queen’s funeral, overall the economy shrank slightly in the third quarter.