The UK’s GDP is estimated to have shrunk in August by 0.3 percent, triggering new fears of a recession.
The Office for National Statistics (ONS) on Wednesday said that production in August fell by 1.8 percent and services fell by 0. 1 percent.
The biggest contributor to the fall in production is manufacturing, which dropped by 1.6 percent, the ONS said.
But construction has grown by 0.4 percent, thanks to a 1.9 percent increase in new work, although repair and maintenance saw a 2 percent decrease.
Services dropped by 0.1 percent following 0.3 percent growth in July, largely owing to a 1.3 percent fall in human health and social work activities and a 5 percent drop in arts, entertainment, and recreation activities.
Consumer-facing services fell by 1.8 percent in August, after a 0.7 percent increase in July.
The drops were partially offset by professional, scientific, and technical activities, which saw a 1.2 percent increase.
The previous estimates for July have been revised down, the ONS said.
GDP in July grew by 0.1 percent, slower than the 0.2 percent previously estimated.
Production in July was previously estimated to fall by 0.3 percent, but the figure has been revised to 1.1 percent.
Services grew by 0.3 percent instead of 0.4 percent as previously estimated.
The latest data mean the economy appears to be on track to contract overall in the third quarter, with the ONS confirming there would need to be a growth of more than 1 percent in September to prevent a quarterly decline.
However, disruptions to economic activities around the state funeral of Queen Elizabeth II are likely to have hampered the performance for the month.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the UK is “a big step closer to a recession,” which is commonly defined as two consecutive quarters of GDP decrease.
“We look for a 0.5 percent quarter-on-quarter drop in GDP in the fourth quarter, building on a similar decline in the third quarter, and a 1.5 percent year-over-year decline in 2023 as a whole,” he said, adding that the recession may not end until late 2023 at the earliest.
Asked about the ONS figures, Business Secretary Jacob Rees-Mogg urged caution in interpreting them.
“The previous quarter’s figure showed a contraction, [which] was then revised to show economic growth. So, be very careful about how you interpret figures immediately after they’re released,” Rees-Mogg told Sky News.
“It’s a small amount of a very large economy, but these figures are notorious for being revised afterwards,” he said.
The UK was previously forecast to have been in recession following a contraction in the first quarter and an estimated decline in the second quarter. But the ONS on Sept. 30 revised its figures to show a 0.2 percent rise in the second quarter instead of a 0.1 percent decline.
