The UK economy indicated no growth in Q3 2023 despite a 0.2% increase in the previous quarter, according to the latest GDP estimates from the Office for National Statistics (ONS).
The services sector is estimated to have declined by 0.1%, offsetting a 0.1% increase in construction and negligible growth in production.
The property and transport sectors were also adversely affected, while consumer spending and business activity declined due to inflation and higher interest rates.
In expenditure terms, household consumption fell by 0.4%, business investment by 2.0%, and government consumption by 0.5% due to reduced spending on health and education.
As a result of falling consumer demand in the UK and elsewhere in Europe, most business surveys have shown decreases in output and employment. Interest rate increases have dampened consumer spending, with many retailers preparing for a difficult holiday season.
More challenges anticipated
Experts such as Suren Thiru from the ICAEW anticipate challenges ahead as businesses express pessimism about their economic prospects, aligning with the ongoing struggle for sustained growth since the financial crisis.
The Bank of England's decision to maintain a 5.25% interest rate raised concerns, with some economists, including James Smith from the Resolution Foundation, suggesting a reevaluation to stimulate growth.
Darren Morgan, director of economic statistics at ONS, said:
"The economy is estimated to have shown no growth in the third quarter. Services dropped a little with falls in health, management consultancy and commercial property rentals. These were partially offset by growth in engineering car sales and machinery leasing."
Chancellor pledges boost in his Autumn Statement
In his Autumn statement on Wednesday 22nd of November, Chancellor Jeremy Hunt emphasised throughout the speech how the announced initiatives and tax cuts were aimed at boosting economic growth.
Expectedly, Hunt highlighted the fall in inflation from 11.1% when the conservatives entered office to 4.6%. He said the Office for Budget Responsibility (OBR) has forecasted that headline inflation will fall to 2.8% by the end of 2024 before falling to the 2% target in 2025.
"I will not take risks with inflation and the OBR confirmed that the measures I take today make inflation lower next year than it would otherwise have been," said Hunt.
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