Hunt: robust highway forward

The news that Britain’s economy is halfway into recession, after shrinking 0.2% within the final quarter, is a sickener forward of subsequent week’s autumn assertion.

Chancellor Jeremy Hunt has blamed the invasion of Ukraine, and Russia’s ‘weaponisation’ of fuel suppliers, for hitting progress and pushing up inflation.

Hunt additionally warns there’s a ‘robust highway forward’, and a few ‘extraordinarily troublesome choices’ (an indication he’s decided to slash spending and hike taxes, despite the fact that that may harm the economic system).

Hunt says:

“We aren’t immune from the worldwide problem of excessive inflation and sluggish progress largely pushed by Putin’s unlawful conflict in Ukraine and his weaponisation of fuel provides.

“I’m underneath no phantasm that there’s a robust highway forward – one which would require extraordinarily troublesome choices to revive confidence and financial stability. However to attain long-term, sustainable progress, we have to grip inflation, stability the books and get debt falling. There isn’t a different manner.

“Whereas the world economic system faces excessive turbulence, the basic resilience of the British economic system is trigger for optimism in the long term.”

“We aren’t immune from the worldwide challenges of excessive inflation & sluggish progress largely pushed by Putin’s unlawful conflict in Ukraine and his weaponisation of fuel provides”.

Chancellor @Jeremy_Hunt responds to at present’s GDP statistics from the @ONS. pic.twitter.com/me9Rt54f59

— HM Treasury (@hmtreasury) November 11, 2022

Up to date at 08.19 GMT

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Austerity mark 2 would compound the disaster – economist

Jeremy Hunt may warn of a ‘tough road ahead’, but it surely’s clear {that a} blizzard of spending cuts and tax will increase will additional harm progress.

A bout of ‘austerity mark 2 ‘ would compound the price of dwelling disaster, and rising borrowing prices, says Thomas Pugh, economist at audit, tax and consulting agency RSM UK.

‘Wanting forward, the squeeze on family actual incomes will intensify as rising rates of interest be part of hovering inflation. What’s extra, the upcoming spherical of austerity, we’re anticipating Chancellor Hunt to impose about £50bn of tax rises and spending cuts, implies that authorities consumption will begin to be a drag on GDP whereas the large rise in enterprise borrowing prices will weigh closely on funding.

As well as, a world financial recession implies that giant rises in export volumes are unlikely to proceed.

‘All this means that the contractions in GDP are usually not solely prone to proceed, however will worsen by means of the primary half of subsequent yr.

The 0.2% drop in GDP in July-September marks the beginning of the recession, predicts Paul Dales of Capital Economics.

He predicts the economic system will shrink for round a yr:

As the results of the additional [September] financial institution vacation could have dropped out in October, GDP might rebound and switch optimistic once more that month and in the beginning of This autumn.

However This autumn can be when the drag from excessive inflation shall be notably giant and the cumulative impact from rising rates of interest shall be constructing. We predict these results will imply that GDP continues to fall for a few yr, leading to a peak-to-trough decline in GDP of round 2%.

UK on target for quickest return to recession since 1975

The UK is on target for its quickest return to recession in nearly half a century, stories the Decision Basis.

They level out that the UK solely emerged from the pandemic downturn eight quarters in the past.

If the economic system shrinks in This autumn, it could be the quickest return to recession because the mid-Nineteen Seventies, when there have been solely 4 quarters between recessions in 1974 and 1975.

James Smith, analysis director on the Decision Basis, says Jeremy Hunt should attempt to forestall the price of dwelling disaster getting any worse:

“Falling client spending has brought about the economic system to shrink within the third quarter of 2022. This has set Britain on target for the quickest return to recession in practically half a century.

“These newest figures present a sobering backdrop to the Autumn Assertion subsequent week. The Chancellor might want to strike a stability between placing the general public funds on a sustainable footing, with out making the cost-of-living disaster even worse, or hitting already stretched public providers.”

Falling GDP makes Hunt’s activity even more durable

A shrinking economic system will make it even more durable for Jeremy Hunt to boost tax revenues, factors out Victoria Scholar, head of funding at Interactive Investor.

With pressures from the cost-of-living disaster, the conflict in Ukraine and rising rates of interest, the UK economic system seems to be on observe to fall right into a recession by the fourth quarter, in what may very well be the longest interval of financial contraction in no less than a century.

Chancellor Jeremy Hunt has a tricky job forward as he prepares to ship his Autumn Assertion on Thursday.

The newest UK GDP figures make plugging the £60 billion black gap much more difficult with the prospect of diminishing tax receipts because the financial backdrop deteriorates.”

Labour: Tories failing on progress

Rachel Reeves MP, Labour’s Shadow Chancellor, pins the blame for the looming recession firmly on the federal government.

She says:

“Right this moment’s numbers are one other web page of failure within the Tories’ file on progress. And the truth of this failure is household funds crunched, British companies left behind and extra nervousness for the longer term.

“Britain’s distinctive publicity to financial shocks has been all the way down to a Conservative led decade of weak progress, low productiveness and underinvestment and widening inequality.

“We’re already set to be close to the underside of worldwide league tables on progress, however all of the Tories supply but once more is austerity.

“Britain has a lot potential to develop. We’ve got the expertise. We’ve got the capability. Labour’s Inexperienced Prosperity Plan, our trendy Industrial Technique, our plan to spice up expertise and our energetic partnership with enterprise will get our economic system firing on all cylinders.”

NEW: GDP figures present UK economic system shrank by 0.2% within the third quarter.

That is extraordinarily worrying – and is one other web page of failure within the Tories’ file.

Britain has a lot potential to develop.

Labour’s Inexperienced Prosperity Plan and our partnership with enterprise will unlock that.

— Rachel Reeves (@RachelReevesMP) November 11, 2022

Up to date at 07.42 GMT

Liz Truss mentioned in August {that a} recession was not “inevitable.” Her actions made a foul scenario worse and this morning Jeremy Hunt kind of throws within the towel. Subsequent week, he’ll try and “stability the books and get debt falling” with out making the downturn longer + deeper pic.twitter.com/e6D4bcXj3f

— Joel Hills (@ITVJoel) November 11, 2022

Hunt: robust highway forward

The news that Britain’s economy is halfway into recession, after shrinking 0.2% within the final quarter, is a sickener forward of subsequent week’s autumn assertion.

Chancellor Jeremy Hunt has blamed the invasion of Ukraine, and Russia’s ‘weaponisation’ of fuel suppliers, for hitting progress and pushing up inflation.

Hunt additionally warns there’s a ‘robust highway forward’, and a few ‘extraordinarily troublesome choices’ (an indication he’s decided to slash spending and hike taxes, despite the fact that that may harm the economic system).

Hunt says:

“We aren’t immune from the worldwide problem of excessive inflation and sluggish progress largely pushed by Putin’s unlawful conflict in Ukraine and his weaponisation of fuel provides.

“I’m underneath no phantasm that there’s a robust highway forward – one which would require extraordinarily troublesome choices to revive confidence and financial stability. However to attain long-term, sustainable progress, we have to grip inflation, stability the books and get debt falling. There isn’t a different manner.

“Whereas the world economic system faces excessive turbulence, the basic resilience of the British economic system is trigger for optimism in the long term.”

“We aren’t immune from the worldwide challenges of excessive inflation & sluggish progress largely pushed by Putin’s unlawful conflict in Ukraine and his weaponisation of fuel provides”.

Chancellor @Jeremy_Hunt responds to at present’s GDP statistics from the @ONS. pic.twitter.com/me9Rt54f59

— HM Treasury (@hmtreasury) November 11, 2022

Up to date at 08.19 GMT

UK economic system smaller than earlier than Covid

The UK economic system is smaller than it was earlier than the Covid-19 pandemic started.

GDP was estimated to be 0.2% beneath its pre-coronavirus ranges of February 2020, following the 0.6% drop in GDP in September.

UK GDP progress to September 2022 {Photograph}: ONS

In distinction, the US economy returned to its pre-Covid levels in the middle of 2021 (though its GDP did then fall within the first half of 2022).

Up to date at 07.32 GMT

Reuters has noticed that the ONS have revised up earlier GDP figures, to indicate the economic system was in higher well being over the summer season:

Gross home product information for August was revised to indicate a marginal 0.1% contraction in contrast with an authentic studying of a 0.3% shrinkage, and GDP in July was now seen as having grown by 0.3%, up from a earlier estimate of 0.1%.

ONS: Fall in GDP pushed by manufacturing

The decline in UK manufacturing final quarter drove the economic system down, says ONS director of financial statistics Darren Morgan:

Morgan additionally factors to a ‘notable’ fall in retail exercise – an indication that the price of dwelling disaster hit client spending.

“With September displaying a notable fall partly as a result of results of the extra financial institution vacation for the Queen’s funeral, general the economic system shrank barely within the third quarter.

“The quarterly fall was pushed by manufacturing, which noticed widespread declines throughout most industries.

“Companies have been flat general, however consumer-facing industries fared badly, with a notable fall in retail.”

GDP fell 0.6% in September, after a revised fall of 0.1% in August 📉

This was pushed by a fall in consumer-facing industries, which have been affected by the extra financial institution vacation for the State Funeral of Her Majesty Queen Elizabeth.

➡️ https://t.co/eixjkIgIdo pic.twitter.com/voK3k25wBT

— Workplace for Nationwide Statistics (ONS) (@ONS) November 11, 2022

UK manufacturing output tumbled

UK factories had one other tough quarter.

Manufacturing output fell by 1.5% in July-September, which is the fifth consecutive quarter of contraction.

This was pushed by a 2.3% tumble in manufacturing output of two.3% – with all 13 sub-sectors of the manufacturing sector shrinking.

Builders did higher – building output rose by 0.6%, a slowdown from the earlier quarter, pushed by an increase in new orders within the quarter.

Up to date at 07.13 GMT

Service sector stalled as state funeral

The UK providers sector stalled within the July-September quarter, with no progress.

That’s partly as a result of state funeral – providers output fell 0.8% in September, following progress of 0.1% in August and 0.5% in July.

{Photograph}: ONS

The ONS says round half of the 0.6% drop in exercise in September was as a result of financial institution vacation.

In contrast to regular financial institution holidays, there was not a shift to leisure and tourism actions due to the widespread nature of enterprise closures.

Subsequently, whereas it is vitally troublesome to separate the financial institution vacation influence from different components affecting the economic system, we estimate that no less than half of this month’s fall in GDP is due to this financial institution vacation.

Up to date at 07.28 GMT

The UK economic system shrank within the final quarter {Photograph}: ONS

Economic system shrank 0.6% in September

In September alone, the economic system shrank by 0.6%.

Development was affected by the financial institution vacation for the State Funeral of Queen Elizabeth II, the place some companies closed or operated otherwise on at the present time, the Workplace for Nationwide Statistics says.

Up to date at 07.06 GMT

UK economic system contracted by 0.2% in Q3 – placing it on brink of recession

Newsflash: the UK economic system shrank by 0.2% within the final quarter, placing it getting ready to recession.

The Workplace for Nationwide Statistics stories that GDP fell within the July-September quarter, following a 0.2% rise in April-June.

That’s much less unhealthy than feared, however nonetheless reveals the UK economic system is weakening as the price of dwelling disaster and rising rates of interest hit the economic system.

Up to date at 07.35 GMT

The rise in folks unable to work on account of ailing well being has additionally hit the UK economic system.

Half one million folks have left the workforce up to now three years as a result of they’re affected by long-term sickness.

Lockdown-related accidents are an element – there’s been a giant rise within the variety of folks being unfit for work due to neck and again issues sustained by means of dwelling working.

And with NHS waiting lists are at record levels, those that need assistance face an extended wait to get therapy.

The worsening well being of the British folks is holding again financial progress for the primary time because the Industrial Revolution after years of underinvestment in providers, Andy Haldane warned this week.

The chief govt of the Royal Society of Arts (RSA) mentioned greater than a century of progress on well being and wellbeing was going into reverse, with a direct influence on the economy and the cost of living emergency.

“We’re in a scenario for the primary time, in all probability because the Industrial Revolution, the place well being and wellbeing are in retreat,” he mentioned.

“Having been an accelerator of wellbeing for the final 200 years, well being is now serving as a brake within the rise of progress and wellbeing of our residents.”

Today’s UK Q3 GDP report is predicted to “spotlight starkly the foolhardiness” of what’s prone to come from the Chancellor of the Exchequer subsequent week, says Michael Hewson of CMC Markets.

As he factors out, tax rises and spending cuts may very well be counter-productive:

Right this moment’s numbers are anticipated to see a pointy contraction of -0.5%, with the outlook for This autumn unlikely to be a lot better, and but subsequent week the UK authorities is about to chop spending and lift taxes to plug what the OBR says is a fiscal black gap of £40bn or so, relying on various assumptions about rates of interest, inflation and progress.

It’s definitely a worrying quantity, however I’m unsure the measures subsequent week will do something to shut that hole. If something, they may make issues worse at a time when the economic system is slowing sharply.

Right this moment’s GDP report might sign the beginning of a deep and lengthy recession, fears Deutsche Financial institution UK economist Sanjay Raja.

He advised purchasers earlier this week that UK GDP in all probability fell by 0.6% in July-September (Q3).

The drop in Q3 GDP displays continued weak point in family and enterprise confidence, larger inflation, and better rates of interest within the economic system, with family consumption contracting within the quarter, enterprise funding slowing, and authorities spending falling additional.

Raja added {that a} This autumn recession can now not be dominated out, with the financial outlook weakening additional forward.

Headwinds to the UK economic system will nearly inevitably push the economic system into recession, with world progress slowing, confidence deteriorating, and persistently excessive inflation and rising rates of interest squeezing disposable incomes additional.

Introduction: UK GDP report might present recession looming

Good morning, and welcome to our rolling protection of enterprise, the monetary markets and the world economic system.

This morning we study if the UK economic system is heading into recession, when the primary estimate of GDP for the final quarter is launched at 7am.

Economists predict that the economic system contracted within the July-September quarter, with exercise falling by round 0.5%, as companies and households wrestle with rising inflation and better borrowing prices.

The surge in UK power payments this yr has hammered disposable incomes, leaving households with much less to spend on different items and providers, and likewise squeezed businsses.

A technical recession is outlined as two quarters of contraction in a row, so this may put the UK getting ready to what can be a painful recession. The Financial institution of England warned final week that the UK might fall into the longest downturn in a century.

It’s nearly inevitable the economic system shrank within the third quarter, explains Alvin Tan of RBC Capital Markets:

To keep away from Q3 GDP contracting for the third quarter as an entire, September month-to-month GDP would want to rise by round 1.2% m/m.

That appears extremely unlikely given September’s additional financial institution vacation for Queen Elizabeth’s funeral, and we count on September GDP to fall 1% m/m, which would depart Q3 GDP displaying a contraction of 0.7% q/q in our estimate.

Such a fall would forged a darkish shadow over Jeremy Hunt’s autumn assertion subsequent Thursday, when the chancellor is predicted to announce tens of billions of kilos of robust spending cuts and tax rises.

Elsewhere at present, monetary markets persevering with to rally after inflation within the US slowed final month. That information that triggered the perfect rally on Wall Avenue in over two years final evening, sending the pound leaping to $1.17.

Japan’s Nikkei index has closed at a two-month excessive, whereas copper – a bellwether of financial prospects – has jumped 3% this morning to a close to five-month excessive.

The agenda

• 7am GMT: UK GDP report for the third quarter of 2022

• 7am GMT: UK commerce report for September

• 7am GMT: Germany’s October inflation report

• 8.30am GMT: Hong Kong’s Q3 GDP report

• 1pm GMT: NIESR publishes its month-to-month UK GDP tracker for October

• 3pm GMT: College of Michigan’s US client sentiment survey for November

Up to date at 06.34 GMT