UK economy was G7 growth laggard in Q3 as dismal 2023 beckons

8:50 am Thursday, December 22nd, 2022

By Andy Bruce

LONDON (Reuters) – Britain’s economy contracted more than first thought in the third quarter of this year, putting it bottom among the Group of Seven major advanced nations ahead of what is shaping up to be a dismal 2023, data showed on Thursday.

Economic output fell by 0.3% in quarterly terms compared with a previous estimate of -0.2%, the Office for National Statistics said.

GRAPHIC – Britain’s quarterly GDP at bottom of G7 table

https://www.reuters.com/graphics/BRITAIN-ECONOMY/GDP/akveqqyqgvr/chart.png

The ONS said the data put Britain bottom in the G7 in terms of quarterly growth, though the readings were skewed a little to the downside by the one-off bank holiday for Queen Elizabeth’s funeral.

Business investment fell by 2.5% in quarterly terms, compared with a previous first estimate of a 0.5% drop.

“Looking ahead, the UK likely will continue to underperform. We expect Britain to suffer the deepest recession among major advanced economies in 2023, due to the severity of the headwinds from both monetary and fiscal policy,” said economist Gabriella Dickens from Pantheon Macroeconomics.

The ONS said British economic output in Q3 was 0.8% below its level of late 2019, compared with a previous estimate of 0.4% below and in contrast to other G7 countries that have recovered.

While the dominant services sector expanded 0.1% in the quarter, declines in manufacturing and construction dragged the headline figure down.

All 13 manufacturing sub-sectors declined in the third quarter, the ONS said, while inflation-adjusted household disposable income contracted for a fourth quarter.

The vast majority of economists polled by Reuters expect the economy will contract again in the current quarter, which in the eyes of some analysts defines a recession.

“Even if the UK economy avoids a recession – and today’s revisions make that harder – it is likely that at least consumer spending and incomes will be falling in Q4 and into 2023,” said Elizabeth Martins, senior economist at HSBC.

(Reporting by Andy Bruce, Editing by Paul Sandle, John Stonestreet and Catherine Evans)