The slowdown in growth is now “spreading throughout the economy”, a top economist has said in wake of this morning’s disappointing GDP figures.
The leading wonk at the Institute of Directors warned of major contractions in multiple sectors following news of a 0.2 per cent fall in GDP this quarter, and a 0.6 per cent fall on a monthly basis, according to the Office for National Statistics (ONS).
It could be the beginning of a recession – which is defined as two quarters of shrinking GDP in a row.
Kitty Ussher, chief economist at the IOD, said the malaise had now infected industries including information and technology and professional scientific actives, after taking hold in retail and manufacturing.
“The ONS point out however that around half the fall in GDP on the month is attributable to the additional bank holiday, although this does not mask the underlying trend.
“The little good news that there is comes from the health sector, with strong growth in pharmaceutical manufacturing, GP visits and critical care. This was also a strong month for the manufacture of commercial vehicles, although domestic new car registrations remains weak.”
Meanwhile, David Bharier, Head of Research at the British Chamber of Commerce , said today’s ONS GDP figure “solidify the picture that the economy is moving towards recession, if not already in one.”
“Worryingly, the figures show a decline across all 13 manufacturing sectors .. with production output overall shrinking by 1.5 per cent”.
Warning that “services as a whole have seen no growth in the quarter” he said the BCC shows firms’ “confidence has fallen significantly in recent months.”
“Inflation, driven by energy costs and supply chain disruption, is by far and away the top factor of concern, wiping out margins for many SMEs.”
Ahead of the autumn fiscal statement, and with inflation set for 12 per cent, Bharier said the 17 November update from Chancellor Jeremy Hunt must “reassure the financial markets after the recent self-inflicted turmoil.”
He added businesses “need to see a long-term economic plan that invests in people, skills, and infrastructure and radically improves our trading relationships with key markets, not least across Europe.”