Britain Sees A Shrink

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What's going on?

Data out on Friday showed that the UK economy shrank last quarter.

What does this mean?

A dastardly duo of wicked prices and rising interest rates is playing havoc with the UK, with the gruesome twosome tanking the economy by 0.2% last quarter. That wince-inducing shrinkage isnt just down to the extra day off for the Queens funeral in September, either: that months 0.6% shrink didnt help matters, sure, but the contraction was already setting in back in August.

The freeze is probably down to a few factors, like feeble manufacturing, dwindling household spending, and underpowered retail sales those last two are biggies, since consumer spending makes up a burlychunk of Britains economy. Put it all together, and you get the first quarterly fall since the locked-down days of early 2021 leaving the UK the only G7 country yet to fully recover from the pandemic (tweet this).

Why should I care?

Zooming in: Downhill from here.
Things arent likely to improve anytime soon: the Bank of England forecast that last quarter would ring in a recession that could take up to two years to shake, and all signs suggest theyre on the money. Just look at manufacturing firms’ inventories: those handy litmus tests of corporate confidence are being cut across the board, amid fears that the cost of living crisis will further gut spending.

The bigger picture: Tightening belts.
How deep this recession goes will probably be decided by whether Brits start spending the 200 billion ($235 billion) in savings theyve put aside since the pandemic began assuming they actually have a choice. See, with Brits take-home pay reportedly poised for a hit in next weeks budget, folk might have to start dipping into their savings whether they like it or not. The governments rumored to be gearing up for a whole raft of tax increases and spending cuts, and the budgets already being called the biggest tightening in government policy since 2010.

Originally posted as part of the Finimize daily email.

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