As pundits anticipate a recession, the July expansion was also lowered downward.
In August, the economy unexpectedly contracted by 0.3% compared to the previous month.
Additionally, the previously reported 0.2% expansion for July has been cut down to 0.1%.
The Office for National Statistics released its most recent report on the United Kingdom’s performance as the government frets over the possibility of an imminent recession, given the impact of the cost of the living problem on demand.
The August result is worse than anticipated, as growth was predicted rather than stagnation.
The contraction is anticipated to result in a more pronounced downturn in September.
Suren Thiru, economics director of the Institute of Chartered Accountants in England and Wales, said that the extra bank holiday for the Queen’s burial will have added to the downward pressure on activity in September, following August’s dismal outcome.
Commentators now fear the United Kingdom is approaching a recession.
The UK economy is on the verge of recession, according to Yael Selfin, chief economist of KPMG UK.
The continued compression of household budgets continues to weigh on GDP, and by the third quarter of this year, the UK economy will likely have entered a technical recession.
Mr. Thiru said, “The government has unnecessarily risked a protracted recession, with any boost from the energy package likely to be overshadowed by a continuous squeeze on UK output due to persistently high inflation, punishing interest rate hikes, and severe financial market volatility.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, remarked, “August’s decline in GDP is certainly the beginning of a downward trend that will last far into next year.”
The ONS data were dismissed as estimates by the business secretary, Jacob Rees-Mogg, who told that “immediately issued figures are frequently updated.
The Bank of England’s efforts to curb inflation through periodic interest rate hikes is increasing the cost burden for borrowers.
The Bank’s responsibility to contain inflation conflicts with the aim of the new Truss administration, which has set an annual economic growth target of 2.5%.
Last month’s mini-budget, which included energy bill assistance for consumers and businesses as well as a series of tax cuts, shook the financial markets.
The consequent crisis of credibility led to a decline in the value of the pound and an increase in government borrowing rates to the point that the Bank was compelled to act.
Tuesday, the International Monetary Fund cautioned the government to ensure its tax and spending plans are consistent with the Bank of England’s mandate to combat inflation.
In other words, addressing inflation should take precedence over encouraging economic growth through tax giveaways that exacerbate the price problem.
The IMF welcomed the possibility of Chancellor Kwasi Kwarteng submitting a debt plan sooner than anticipated.
This will now be delivered to the House of Representatives by the Office of Budget Responsibility on October 31.
In response to this morning’s news, Mr. Kwarteng stated that the United Kingdom faces global issues that would be addressed by his government’s growth plan.
“Countries around the globe are currently suffering hardships, notably as a result of rising energy costs caused by Putin’s cruel actions in Ukraine,” he stated.
“Because of this, the government moved swiftly to implement a comprehensive strategy to shield people and businesses from increasing energy costs this winter.
“Our Growth Plan will address the problems we confront with ambitious supply-side reforms and tax cuts, which will grow our economy, generate more well-paying skilled jobs, and ultimately enhance living standards for all.”
