Britain's economy shrank at its fastest rate since 1990 in the third quarter as household spending fell by its biggest amount in more than a decade, official data showed this morning.
The Office for National Statistics confirmed the economy contracted by 0.5 per cent in the July to September period compared with the previous quarter, leaving the annual rate of growth at 0.3 per cent, the weakest since 1992.
The figures showed the consumer sector and manufacturing suffered more than previously thought and that government spending was just about the only thing supporting the economy in the third quarter.
The data reinforced concerns that Britain is sliding into a deep recession and will add to expectations that interest rates will need to fall further.
"There is nothing here to suggest that the economy is not going to carry on contracting for a prolonged period," said Jonathan Loynes, chief European economist at Capital Economics.
"We continue to expect GDP to fall by around 1.5 per cent next year and by another 1 per cent or so in 2010."
The distribution, hotels and catering sector contracted by a downwardly revised 1.9 per cent in the third quarter, its sharpest fall since 1980, when Britain was suffering a deep downturn.
Household spending fell by 0.2 per cent on the quarter, the biggest decline since the first quarter 1995. It was the second straight quarter of decline, making it the longest stretch of falls since the recession of the early 1990s.
The ONS said the figures were depressed by sharp declines in sales of motor vehicles and household goods.
Britain's government announced a £20 billion (€23.6 billion) fiscal stimulus package on Monday, which it hopes will prevent the prolonged downturn that many economists predict.
British government spending rose by 1 per cent in the third quarter, the ONS said.
It also revised down its estimates for manufacturing sector activity to show a decline of 1.3 per cent on the quarter, the weakest since the fourth quarter 2001.
Reuters