UK economy shrinks for first time in two months

Overall, monthly GDP is estimated to have fallen by 0.3% in the month, following growth of 0.2% in September. Broken down by sector, services, production and construction are all estimated to have declined – dropping by 0.2%, 0.8% and 0.5% respectively.  

Turning to the quarterly GDP figures – this time focused on the third quarter and spanning between the months of July and September – over the course of this period the UK economy showed no signs of growth, following an increase of 0.2% in the previous quarter. However, GDP is estimated to have increased by 0.6% when compared with the same quarter a year ago.  

In output terms, there was a 0.1% fall in the services sector – offsetting the 0.1% increase in construction output and the broadly flat output seen in the production sector.  

Commenting on these figures, Wealth Club investment analyst Nicholas Hyett said: “With the Bank of England expecting to leave interest rates unchanged on Thursday, this is shaping up to be a flatline festive period.  

“GDP has gone nowhere over a three month period, as a bleak October offset some more positive numbers from the end of the summer. While the crucial services sector has been negatively affected by US actor strikes, which is a bit of a one-off, the rest of the GDP report paints a gloomy picture.

“Manufacturing is down nearly one percent and house building activity has fallen nearly five percent. With labour markets also showing signs of weakness, another interest rate hike is looking increasingly unlikely.  
“The question now is when the Bank starts cutting rates. Leave it too long and the cure could yet prove worse than the disease . . . who would want to be a central banker.”