Business group says 0.3% fall in monthly GDP is ‘warning sign that economy already stalling before market turmoil of recent weeks’
The former Bank of England deputy governor, Sir Charlie Bean, said he wasn’t surprised that the pound had fallen last night on the governor’s remarks – that the central bank would not extend its emergency bond-buying programme beyond Friday. He told BBC radio 4’s Today programme:
Main market participants expected the Bank simply to extend its facility.
If you say you’re going to keep on extending the facility, you take the pressure off the pension funds to do what’s needed, you also take the pressure off the government to do what’s needed and get the fiscal position in order. We shouldn’t forget that this is the prime cause of it [the market turmoil].
August’s drop in GDP likely marks the start of a downward trend that will continue deep into next year. The drop was driven by a 1.8% month-to-month fall in output in consumer-facing services sectors, reflecting the intense real income squeeze on households. Indeed, output fell by 5.0% in the arts, entertainment and recreation sector and by 1.8% in the food and accommodation services sector.
The downturn in global goods trade also hit manufacturing output, which dropped by 1.6%. Admittedly, warmer-than-normal weather contributed to the 0.6% fall in the output in the energy supply sector, and greater-than-usual maintenance at oil rigs explains why output in the mining and quarrying sector plunged by 8.2%. But a reversal of both of these blips in September would boost month-to-month growth in GDP by only 0.08pp.
