Britain’s gross domestic product (GDP) contracted slightly in the third quarter, according to revised figures. According to the BBC, the British economy is at risk of recession. This is usually defined as two consecutive quarters of economic contraction.
Economic Contraction Signals Potential Recession
The UK Statistics Authority said in a report today that GDP fell by 0.1 percent in the third quarter. It revised up its November estimate that the economy was stagnant. The bureau also revised the second-quarter GDP trend today from 0.2 percent growth to stagnation.
Analyst Ashley Webb of Capital Economics said the revised figures could mean that the “mildest of mild recessions” began in the third quarter. Webb also said that regardless of whether the current recession is only mild, the UK economy’s growth prospects for next year remain weak.
Policy Shift
The Bank of England has so far held back economic growth by raising interest rates in an attempt to bring inflation under control. However, British Chancellor of the Exchequer Jeremy Hunt said this week that the central bank could cut interest rates to boost the economy. The finance minister’s comment on central bank policy is a highly unusual move, Reuters reported.
Following today’s release of revised third-quarter GDP figures, Hunt said the outlook for the British economy was not as unfavourable as the figures suggested.
According to Reuters, some economists believe the British economy could avoid a recession. Samuel Tombs of Pantheon Macroeconomics, for example, predicts that GDP will stagnate in the fourth quarter and that British households will see their financial situation improve next year, thanks to a further fall in inflation, a lighter tax burden and higher welfare payments.
Source: čtk
