UK economy contracted in August as cost of living crisis hit

The UK economy defied expectations and contracted in August as the cost of living crisis hit households and businesses.

Gross domestic product fell by 0.3% between July and August, according to data released by the National Bureau of Statistics on Wednesday.

Economists polled by Reuters had expected no month-on-month change.

Output in the three months to August was down 0.3% from the previous three months, below analyst expectations.

Industrial production contracted by 1.8% in July-August, while services registered a modest decline of 0.1%.

ONS chief economist Grant Fitzner said part of the contraction in industrial production was due to lower oil and gas production due to summer maintenance in the North Sea.

He added that health also contributed to the decline in GDP, with fewer hospital visits and surgeries.

Sporting events also suffered a weak month after a strong July, but many other consumer services struggled, with retailers, hairdressers and hotels all struggling relatively.

On Tuesday, the International Monetary Fund downgraded its economic outlook for the UK, expecting a 0.3% expansion next year from 3.6% this year.

Brian Coulton, chief economist at ratings agency Fitch, said the economy could shrink by 1% in 2023, reflecting market turmoil and the prospect of higher interest rates following the government’s drastic tax cuts announced last month. and expect a deeper recession.

Robert Ulster, chief investment officer at investment manager Close Brothers Asset Management, said as the Treasury sought to boost confidence in the sustainability of the UK’s debt, “many are prime ministers who will make a decision next month. It depends on what you say in the budget,” he said.

“Unless we succeed, fiscal conditions are likely to continue to tighten, weighing on growth,” he added. UK economy contracted in August as cost of living crisis hit

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