The UK economy is set to squeeze out anaemic growth as the recovery from the Covid-19 crisis continues to slow, according to City economists.
Severe supply chain bottlenecks, compounded by soaring energy prices, logistics systems breaking down and a paucity of workers has crimped businesses.
As a result, the size of the British economy is likely to have remained unchanged over the last month, economists at Pantheon Economics think.
Those findings will be put to the test on Thursday when the Office for National Statistics (ONS) publishes its latest estimates for monthly and quarterly GDP.
A slowdown in consumer spending, driven by Brits shunning shopping trips to preserve petrol amid a fuel crisis that plagued the country in September, kept economic growth in check.
Output in the manufacturing sector was weak due to a “slump in car production” as a result of an ongoing global shortage of semiconductor chips, Pantheon Economics said.
Industrial firms likely held back on production due to higher prices for raw materials and energy making normal business activities financially unviable.
According to the ONS, input prices climbed 11.4 per cent annually in September.
However, despite the blizzard of headwinds knocking businesses off course, there will be some bright spots in the ONS’s figures.
The final tranche of Brits staycationing before the end of the summer amid ongoing travel bans will boost production in the food and accommodation sectors.
“Investment growth” is likely “to have improved with businesses ramping up activity, although supply chain shortages would have had some impact,” Yael Selfin, chief economist at KPMG, said.
The quarterly statistics will also show the economy is in ruder health as they will take into account July and August as well as September and compare the period to the second quarter, a time when the recovery was just getting off the ground.
But, the quarterly print will still underwhelm and – coupled with the poor monthly GDP figures – prompt Bank of England to hold off from hiking interest rates next month, according to economists at Bank of America.
Experts at Pantheon Economics agree.
“September’s data likely will unsettle the [Bank of England], which highlighted last week that the recent fragility of the recovery played a role in its decision to stand pat.”