The crisis that the UK economy is going through is being somewhat deeper than initially estimated. The islands’ gross domestic product (GDP) contracted by 0.3% between July and September, one tenth more than what the National Statistics Office (ONS) had initially calculated. In November, the ONS had calculated that the quarter of activity in the third year had been 0.2%, compared to the growth of 0.2% that had been registered in the three previous months.
The services sector, which according to the first statistical calculation had stagnated, finally advanced by 0.1% in that period. However, the industrial sector fell 2.8% (well above the first estimate, of 2.3%), while construction fell 0.2% (compared to the 0.6% increase reported in the calculation published last month).
The ONS’s director of statistics, Darren Morgan, explained that the figures reviewed by the agency “show that the economy performed a little less over the past year than we had previously estimated.” And he also added that family income continued to fall in real terms, “although at a slower pace than in the two previous quarters”, he specified.
The ONS has made these data public only one day after reporting that the accumulated debt of the United Kingdom had climbed until the end of November to 2.47 trillion pounds (around 2.81 trillion euros at current exchange rates), which which is equivalent to 98.7% of British GDP.
UK fights highest inflation in 40 years
Last week, the Bank of England (BoE) announced an interest rate hike of 0.50 percentage points to 3.5%, its highest level in the last 14 years (specifically since 2008, when the outbreak of the global financial crisis). The entity, like the rest of the large Western central banks, has undergone its monetary policy to face an annual rate of inflation that in November barely eased to 10.7%, compared to the 11.1% it marked in October. This implies that the rise in prices remains at the highest levels of the last four decades.
“Domestic pressures on wages and prices are elevated. Most indicators of global supply chain bottlenecks have eased, but global inflationary pressures remain elevated. Government bond yields from advanced economies have fallen, particularly in the longer maturities,” the British central bank pointed out after its latest monetary policy meeting.
The Bank of England’s decision came just after the US Federal Reserve eased its tightening plans with a half-point rate hike last week, bringing its target range to 4.5% from 4.25%. The Fed said the US is now close to the rate terminal, which it estimates at just over 5%. Markets estimate that UK rates should reach around 4.75%.
