The UK economy, in the month of September, managed to dodge a potential recession with a slight 0.2% economic upturn, bouncing back from a downturn experienced in July, according to data released on Friday. This recovery was largely attributed to growth in the construction sector, which helped maintain the stability of the UK’s Gross Domestic Product (GDP) over the three months leading up to September, despite a slight decrease in the services sector.
The country’s economy has been experiencing a sideways drift for the past 18 months as indicated by Q3 2023 figures. A contributing factor to this trend is the residential housing market’s decline due to higher interest rates, resulting in a 1.7% fall in investment over three months up to September. This marks four straight quarters of decrease.
The Bank of England has predicted a stagnant economy for 2024, based on rising interest rates and the potential for private sector stagnation. The Office for National Statistics advised caution while interpreting the 0% growth in Q3 and the 0.1% growth in September.
Inflation concerns have led to reduced household spending and a slump in business investments following an earlier growth phase. This is likely due to companies accelerating expenditures before the end of the super deduction tax break. The absence of policy easing measures such as interest rate cuts or tax cuts from the Bank of England or Treasury is contributing to this economic stagnation.
CBI lead economist Ben Jones highlighted the potential impact of Chancellor’s impending Autumn Statement on economic forecasts. Both Threadneedle Street’s monetary policy committee and Jeremy Hunt are unlikely to implement policy easing measures due to concerns about inflation.
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