The Economic deep dive was produced before the Chancellor's announcement on 17 October, and as such, was accurate at time of production.
Quarterly highlights:
- UK GDP contracts in August - UK GDP shrank by 0.3% in August, reflecting a decline in manufacturing output and slightly lower services activity. The size of the economy is now broadly unchanged from its prepandemic level in February 2020. Business surveys point to activity falling over Q3 as a whole.
- Inflation remains near a 40-year high - Headline inflation dipped slightly to 9.9% in August but remains significantly above the Bank of England’s 2% target. While the Government’s energy package will bring some relief to households and businesses, the broader fiscal stimulus measures announced in September will likely strengthen domestic inflationary pressure over the medium-term.
- UK labour market remains tight - The unemployment rate sank to its lowest level since 1974, as inactivity remained elevated. However, we expect some softening in the labour market as demand wanes across the economy, pushing up unemployment slightly over the next year.