By John Ikani
The UK economy unexpectedly shrank by 0.3% in August, strengthening predictions that it will fall into a recession.
The shrinking was occasioned by a slump in manufacturing and by maintenance work that slowed the oil and gas sector.
GDP dropped by 0.3pc in the month, the Office for National Statistics said, following growth of 0.1pc in July – below the 0.2pc expansion it initially estimated.
It sets the economy up for a decline in GDP in the third quarter as a whole, with a recession usually defined as two consecutive quarterly contractions.
Analysts thought the economy would stall in August but not shrink as costs mount for businesses and households.
Prices are rising at their fastest rate for 40 years, eating into people’s budgets, and outpacing growth in pay.
The Bank of England has previously said that it expects the UK to fall into a recession by the end of the year.
It is likely that the contraction will result in a sharper period of slowdown in September.
“August’s negative out-turn should be followed by a more marked drop in September’s output as the extra bank holiday for the Queen’s funeral will have added to the downwards pressure on activity,” Suren Thiru, economics director of the Institute of Chartered Accountants in England and Wales, said.
