AJ Bell press comment – 11 November 2022
- UK GDP shrank 0.2% in the three months to September
- September GDP fell 0.6% in part because of the bank holiday for the state funeral of Queen Elizabeth II
- The cost-of-living crisis is eating into consumer spend and the manufacturing sector is still being impacted by the availability of some raw materials
Danni Hewson, AJ Bell financial analyst, comments on Quarterly GDP figures:
“It’s a strange quirk that economies have to be in recession for a full six months before the technical label can be applied, but for all those households already struggling to find the cash to pay for life’s basics a label means absolutely nothing.
“It’s no surprise the service sector is shrinking, people are going as long as they can between haircuts or resurrecting lockdown methods of trimming their own locks. People are having to spend more to buy less, and they’re terrified of what a cold winter might do to already battered budgets.
“The manufacturing sector is struggling with a double whammy of rising energy prices and a shortage of some raw materials for some as supply issues are finally working their way through the system, but all 13 subsets of the sector were in decline.
“A 0.2% fall isn’t as bad as many economists had been expecting and September’s GDP number has to be viewed as a particular outlier. Many businesses closed their doors to mark the funeral of her majesty Queen Elizabeth II, production stopped and parents stayed home with their children.
“But the UK economy is in a tricky place, 0.4% below where it was before covid took a bite and facing up to a winter of discontent followed by a long and bumpy recession. Businesses that had struggled to find their footing since lockdowns ended, have instead been knocked off their feet by raging inflation and rising interest rates.
“After months of talking about record vacancy numbers the headlines are shifting and instead of hiring some businesses are having to think about firing. Slowdowns would normally trigger a slew of measures aimed at boosting spend like VAT reductions and interest rate cuts. But those measures are not on the table, instead decision makers are faced with the unpalatable task of making things worse in a bid to finally make things better.”
