Yesterday, the official stats provider for the UK downgraded previous estimates of economic growth.

Quarter 2, 2023 now recorded as 0% growth (Apr to Jun). Quarter 3, 2023 now recorded as -0.1% growth (Jul to Sep).

The monthly figure for October was recorded as -0.3% as well.

So, at the start of Quarter 4, the UK economy has continued to get smaller.

On top of that, the inflation rate is falling, now at 4.2%. Although this is good news, it doesnt mean prices are falling, it means they are still going up, just more slowly. Yet here's the thing; prices are slowing down because companies and people are starting to run out of money, so they are buying less, meaning inflation falls as sellers have to compete more on price as demand starts to fall. So although lower inflation is a good thing, the reason prices are slowing down is because the economy is doing badly!

Why is this? Well, interest rates are still at a relatively high level, at 5.25%. So mortgages (with a knock on effect for rents) are more expensive, and the combined inflation of the last couple of years has knocked about 25% off the value of people's earnings... So basically, everyone is poorer, buys less stuff, and the size of the economy shrinks.

The BOE has said it wants to keep rates high, despite the economic damage. So, the crazy thing about current public policy is the Gov and the Bank of England are deliberately trying to stall the economy, to reduce inflation. Interesting!

And bear in mind the UK is still easily in the top 10 largest national economies.

We now need to see if this contraction continues for the rest of 2023....

Sources: https://www.ons.gov.uk/