UK a ‘stagnation nation’ after economy fails to grow in last quarter – business live

The TUC fears that the UK is ‘teetering on the brink of recession’, with a bleak economic outlook, after GDP failed to grow in the last quarter.

TUC General Secretary Paul Nowak said:

“Working people are paying the price for Tory failure.

“Today’s dismal growth figures – with household, government and business spending all falling – is yet more evidence of their economic mismanagement.

“The outlook is bleak. The UK is teetering on brink of recession with unemployment rising and no real green shoots on the horizon.

“We can’t go on like this. Jobs and livelihoods are on the line.

“We need a serious plan for jumpstarting our stagnant economy. That means a proper industrial strategy and investment in green infrastructure and public services.

“And this means a change of government.”

The UK is a ‘stagnation nation’ at real risk of a recession, says the Resolution Foundation thinktank.

Following today’s GDP report, James Smith, Research Director at the Resolution Foundation, explains:

“The UK economy has stagnated again in recent months, driven in part by the rapid rise in interest rates since late 2021. There is a real risk that the UK could fall into recession for the fourth time in 15 years.

“Britain is a stagnation nation that has struggled to secure sustained economic growth since the financial crisis. Addressing this is the central task we face as a country, and must be at the heart of the Chancellor’s Autumn Statement in 10 days’ time.”

Britain’s failure to grow in the last quarter compares poorly to the US economy, which had a strong three months.

But it’s better than Germany, and the wider eurozone, which both shrank a little.

Here’s the latest data we have for Q3 GDP in major advanced economies:

Although UK GDP in July-September was a little better than expected, the economy has largely stagnated this year, says James Smith, developed markets economist at ING.

We shouldn’t make too much of the fact that the UK economy performed a little better than expected in the third quarter. The level of real GDP was flat relative to the second quarter, compared to consensus and our own expectation of a 0.1% decline.

The details reveal that the economy was rescued by net imports, a category that tends to be pretty volatile between quarters. Other key areas – notably consumption and business investment – were negative on the quarter. But we also have to remember that it’s been a fairly wild few months for several key sub-sectors of the GDP figures. June saw a massive 0.7% rise in activity, owing to a highly unusual surge in manufacturing. And July saw a corresponding 0.6% drop as that production boost partly unwound, but also on a number of public sector strikes in health/education.

What’s happened since – with GDP growing by 0.1% in August and 0.2% in September – is as much about those trends unwinding as it is about genuine economic activity growth.

In September alone, the economy grew by 0.2%, better than the 0% growth expected.

The ONS says:

• Services output rose by 0.2% in September 2023, driven by growth in professional, scientific and technical activities, and human health and social work activities, and was the main contributor to the growth in GDP; this follows growth of 0.3% in services output in August 2023, revised down from growth of 0.4% in our previous publication.

• Output in consumer facing services fell by 0.2% in September 2023 after a fall of 0.7% in August 2023, revised down from a fall of 0.6% in our previous publication.

• Production output showed no growth in September 2023 after falling by 0.5% in August 2023, revised up from a fall of 0.7% in our previous publication.

• The construction sector grew by 0.4% in September 2023 after a fall of 0.8% in August 2023, revised down from a fall of 0.5% in our previous publication.

But August’s GDP data has been revised down to show growth of just 0.1%, not the 0.2% growth previously estimated.

High interest rates hit UK growth in the last quarter, says Jeremy Batstone-Carr, European strategist at Raymond James Investment Services:

“ONS data released today reveals flatlining in GDP, reflective of the lagged effect of the Bank of England’s aggressive rate hikes on economic activity. These figures represent a grinding continuation of the UK’s lacklustre economic performance, a period of weakness stretching back more than two years.

The data shows that fragility has permeated across economic sectors. Stagnation in the service sector has coincided with weakness in construction activity and manufacturing production and output. Industrial action by doctors and rail workers has contributed to a weak outturn from the transportation and healthcare sector, while weak high street activity has contributed to downbeat service sector performance, which was already dampened by squeezed consumer spending even as inflationary pressures abate.

Nonetheless, there is a glimmer of encouragement in today’s trade data. Export volumes rose more than import activity, supported by the sterling’s resilience against trading counterparts.