UK economic recovery slowed in October as GDP growth hit 0.4%
THE UK economy grew by just 0.4% in October as its recovery from the coronavirus crisis slowed, new figures show today.
October marked the sixth consecutive month of expansion, but it shows that gross domestic product (GDP) growth had already started stalling even before the second lockdown in England.
Experts expect GDP figures to fall in November following the second national lockdown.
The economy is now 23.4% higher than its April low, but it remains 7.9% below February's pre-coronavirus level.
GDP had expanded by 1.1% in September, followed by 2.1% growth in August and 6.6% growth in July, according to the Office for National Statistics.
However, there are hopes that the economy could still recover to pre-pandemic levels quicker than expected after the UK started rolling out the first Pfizer vaccines this week.
What this means for your personal finances
GROSS domestic product (GDP) is one of the main indicators used to measure the performance of a country's economy.
When GDP goes up, the economy is generally thought to be doing well although today's figures aren't as strong as hoped.
Negative growth often brings with it falling incomes, job cuts and lower consumption.
The Bank of England (BoE) uses GDP as one of the key indicators when it sets the base interest rate.
This decides how much it will charge banks to lend them money, and is a way to try to control inflation and the economy.
So, for example, if prices are rising too fast, the BoE could increase that rate to try to slow the economy down. But it might hold off if GDP growth is slow.
The BoE cut interest rates twice in March due to coronavirus.
Base rate cuts means mortgage borrowers now typically benefit from lower rates, but at the other end of the scale savers earn less on their savings.
To measure GDP, the Office for National Statistics (ONS) collects data from thousands of UK companies.
Andrew Wishart, UK economist at Capital Economics, told The Sun the full impact of the crisis on jobs and businesses will only become apparent once the government starts to withdraw its support.
It comes after the economy rebounded out of recession after growing a record 15.5% in the three months to September.
This third-quarter growth was the highest since records began in 1955.
The UK officially plunged into its "worst ever" recession earlier this year when GDP shrunk by a record 20.4% in three months.
A recession is when GDP falls for two consecutive three-month periods.
The Office for Budget Responsibility (OBR) now expects the economy to shrink by 11.3% this year - its biggest decline for more than 300 years.
It then predicts growth of 5.5% in 2021.
Commenting on the figures, Chancellor Rishi Sunak said: "Our unprecedented package of support has protected more than 12 million jobs and millions of businesses across the UK.
"I know people are worried about the winter months but we will continue to support people through our Plan for Jobs to ensure nobody is left without hope or opportunity."
Jonathan Athow, deputy national statistician at the ONS, said the month saw strong growth in retail and a recovery in car manufacturing.
He added: "The UK economy has now grown for six months running but still remains around 8% below its pre-pandemic peak.
"Public services output increased, while car manufacturing continued to recover and retail again grew strongly.
"However, the reintroduction of some restrictions saw services growth hit, with large falls in hospitality, meaning the economy overall grew only modestly."
Suren Thiru, head of economics at the British Chambers of Commerce, said: “The sharp slowdown in economic output in October reflected the squeeze on activity from the re-introduction of tighter coronavirus restrictions, including the tier system in England.
“Firms in hospitality, who are most acutely exposed to the renewed restrictions, suffering particularly badly in the month.
“October’s slowdown is likely to be followed by a significant contraction in economic activity in November as the effects of the second coronavirus lockdown are felt."
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The latest GDP figures come after UK unemployment hit 4.8% with 782,000 out of work since March.
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But in better news, the Chancellor last month confirmed the National Living Wage would increase to £8.91 an hour.
Mr Sunak announced the wage boost as part of his Spending Review which detailed how the UK would finance the coronavirus crisis during winter.