The Bank of England has warned that the UK is facing its longest recession since records began a century ago.
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London — UK economy contracted by 0.2% It indicates that the third quarter of 2022 could be the beginning of a prolonged recession.
Preliminary estimates show the economy outperformed expectations in the third quarter despite the recession. Economists had forecast a contraction of 0.5%, according to Refinitiv.
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After the contraction of 0.1% in the second quarter was corrected to an increase of 0.2%, the contraction still does not represent a technological recession marked by two consecutive quarters of negative growth.
“In terms of output, there was a slowdown in the quarter for services, manufacturing and construction. The services sector saw flat output in the quarter, driven by a decline in consumer services. Q3 2022 All 13 manufacturing subsectors will fall in 2020,” the National Bureau of Statistics said in a report on Friday.
The Bank of England last week predicted the longest recession since records began, with the recession that started in the third quarter likely to last through 2024 and the unemployment rate could reach 6.5% over the next two years. suggests high.
The country is facing a historic cost of living crisis, compounded by pressure on real incomes due to high prices for energy and traded commodities. The central bank recently imposed its biggest rate hike since 1989 as policymakers sought to keep his double-digit inflation in check.
Quarterly GDP levels in Q3 were 0.4% below pre-corona levels in Q4 2019, according to ONS. On the other hand, his September figures were hit by the holiday, as Britain’s GDP fell by 0.6%. For the state funeral of Queen Elizabeth II.
UK Finance Minister Jeremy Hunt is set to unveil a new fiscal policy agenda next week that is expected to include significant tax increases and spending cuts. Prime Minister Rishi Sunak has warned that “difficult decisions” will be needed to stabilize the country’s economy.
“While some headline inflation may start to improve over time, we expect prices to remain elevated for some time, putting more pressure on demand,” said George Lagarius, chief economist at Mothers.
“If next week’s budget proves to be really ‘difficult’ for taxpayers, as expected, consumption will probably be further subdued and the Bank of England will begin to ponder the impact of demand shocks on the economy.”
Dutch bank ING expects a cumulative hit to UK GDP of 2% by mid-2023, comparable to the country’s recession in the 1990s.
ING Developed Markets economist James Smith said banks expect economic activity to contract by 0.3% in the fourth quarter as consumer spending falls, which will cement a technological recession. rice field.
“As winter deepens, tensions are also expected to rise in the manufacturing and construction sectors, both of which were hit hard during the recessions of the 1990s and 2008,” Smith said. .
“Falling new orders for manufacturing associated with lower global consumer demand for goods and higher inventory levels, as well as higher energy costs, point to lower production by early 2023. “A sharp rise in mortgage rates and very early signs of a decline in home prices point to a weakening in construction activity over the next year.”
ING expects the Bank of England’s rate hike path to peak at around 4%, but Smith said much depends on next week’s fiscal announcement.
“Naturally, much focus will be on how the Prime Minister will address the projected budget deficit in 2026/27. “We are looking for more details on how to ease into 2023. We have the most room to rebuild our outlook for 2023.”
