UK's economy shrinks by 0.3% in October
The United Kingdom's economy took an unexpected hit in October, with the gross domestic product (GDP) dropping by 0.3%, as reported by the UK's Office for National Statistics (ONS). This decline comes after a 0.2% growth in September and is the first time since July that all three main sectors monitored by the ONS have dipped into negative territory. Experts had predicted a smaller contraction of just 0.1%.
Factors behind the contraction
Darren Morgan, ONS director of economic statistics, stated that "GDP growth was flat across the last three months." He credited this to growth in services like engineering, film production, and education, which balanced out declines in manufacturing and housebuilding. However, October witnessed contractions in all three main sectors, with services being the primary cause of the fall due to decreases in IT, legal firms, and film production.
Manufacturing and construction sectors affected
Besides the decline in services, widespread drops in manufacturing and construction also played a part in the overall contraction of the UK economy in October. Morgan mentioned that these sectors were adversely affected by poor weather conditions. This unforeseen contraction raises concerns about the UK economy's health and may lead to further examination and monitoring of these crucial sectors.
Is the UK heading toward a recession?
The drop in UK GDP for October raises worries that the economy could shrink further in the final three months of 2023, which might bring the UK close to a recession. When a country's GDP contracts for two consecutive quarters, it enters a technical recession. If the UK's economy keeps weakening, the Bank of England might consider reducing interest rates in 2024. Meanwhile, the Pound fell by 0.33% against the US dollar, reaching $1.2525 today.
