Media ININ Economy We Trust
British economic activity recorded a decline in the third quarter, as inflation and the rise in the cost of living began to weigh on the economy, which appears to have entered a recession.
Gross domestic product fell 0.2% between July and September, compared to a 0.2% increase in the second quarter, the National Statistics Office announced Friday in its monthly report on economic activity.
The decline was particularly notable in September (-0.6%) due to the national holiday for the burial of Queen Elizabeth II which led to the closure of many businesses.
The Bureau of Statistics mentioned the high cost of living as a factor that weighs on the production of companies, and inflation, which is now around 10% in the country.
The consumer and retail sectors especially suffered from the reluctance of consumers who face rising bills.
The end of September also saw financial turmoil stemming from the massive and unfunded budget measures of the previous government headed by former Prime Minister Liz Terrace.
Ex-Finance Minister Kwasi Kwarting appeared to have partly wanted to distance himself from this failure, asserting in an interview with a talk show that he had tried to warn Liz Truss that budgetary measures aimed at encouraging growth were going “too fast”, though he admitted they had “surprised” the markets and that he could afford to do so. the responsibility.
These budget announcements caused the pound to fall to its lowest level in history and borrowing rates for British long-term debt, which had an impact on corporate and household loans, especially as the Bank of England was in the process of raising interest rates to cool inflation.
Last week it raised the benchmark interest rate by 0.75 point – the highest increase since 1989 – to 3% while painting a bleak economic picture, warning of a recession that could be Britain’s longest.
All of these factors undermine the confidence of consumers, investors and employers.
hard way
Samuel Tombs of Pantheon Macro sees the decline in activity in September was greater than analysts had expected.
“The British economy again finds itself at the bottom of the Group of Seven, affected by its monetary and fiscal policy and the significant long-term damage from Covid and Brexit,” he said.
This summer in particular, many sectors of the economy were disrupted due to the shortage of workers, caused in part by the exit of those over 50 years old or those with chronic diseases, many of them due to the repercussions of Covid, from the labor market.
This labor shortage was also attributed to Britain’s exit from the European Union, which made it more complicated for European workers to come to the country.
Paul Dills of Capital Economics considers that even with the holiday effect removed, “real GDP shows a decline in the third quarter and we think that this marks the beginning of a recession” — defining a contraction in two consecutive quarters.
“We are not getting away from the global difficulties associated with high inflation and slow growth caused in large part by the war … in Ukraine and restrictions on Russian gas supplies that have driven up energy prices and inflation,” said Finance Minister Jeremy Hunt.
Speaking of “a difficult path awaits us, which will require very difficult decisions to restore confidence and economic stability,” he stressed that “in order to reach long-term growth, we must curb inflation, balance accounts and reduce debts.”
The minister will present a draft budget next week that will include reducing public spending and increasing taxes, which raises fears of a return to austerity in the country.
Labor economics chief Rachel Reeves described the gross domestic product figures as “deeply worrying.”
