UK economy contracts by more than expected in third quarter

The UK economy contracted by more than previously estimated in the third quarter, while households’ disposable income continued to fall, according to data published on Thursday by the Office for National Statistics.

Output fell 0.3 per cent between the second and third quarter, a larger contraction than initial estimates of 0.2 per cent. The figures show the UK lagging further behind other advanced economies.

“Our revised figures show the economy performed slightly less well over the last year than we previously estimated, with manufacturing and electricity generation notably weaker,” said Darren Morgan, ONS director of economic statistics.

In the third quarter, the UK economy was 0.8 per cent below the level in the final quarter of 2019, before the pandemic. By contrast, output in the US, Canada and the eurozone was ahead of pre-pandemic levels in the same period.

The ONS also showed that real households’ disposable income, which is what households have available to spend after taking inflation into account, fell 0.5 per cent between the second and third quarter. It was the fourth consecutive fall as wages have not kept up with inflation.

“Household incomes continued to fall in real terms, albeit at a slower rate than in the previous two quarters, while — taking account of inflation — household spending fell for the first time since the final Covid-19 lockdown in the spring of 2021,” said Morgan.

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