Quarterly Economic Commentary- July To September 2023

23rd December 2023

Gross domestic product (GDP) contracted by 0.1% in Quarter 3 (July to Sept) 2023, leaving the UK economy only marginally larger compared with a year ago, as higher prices and tighter financial conditions led to a slowing in the economy.

The UK was a net borrower from the rest of the world of 2.5% of GDP in Quarter 3 2023; there was an improvement in the UK's net investment income, particularly in debt and equity investment, with higher global interest rates increasing the returns on those financial investments.

There was a further cooling in labour demand, as job vacancies fell for the 17th consecutive period in September to November 2023, while annual growth in regular earnings was 7.3% in the three-month period August to October 2023, following the peak of 7.9% earlier in the year.

Headline 12-month consumer price inflation (CPI) slowed from 4.6% in October to 3.9% in November 2023, while the annual rate of core inflation declined for a fourth consecutive month to 5.1% in November.

National Accounts
Economic activity in the UK has been relatively weak over the last 18 months. Gross domestic product (GDP) fell by 0.1% in Quarter 3 (July to Sept) 2023, leaving the UK economy only marginally larger compared with a year ago.

One indicator of economic welfare is changes in the purchasing power of GDP. There have been larger changes in gross domestic income (GDI) through 2022 and 2023 because of the increase in energy and commodity prices. This terms-of-trade effect was minimal in Quarter 3 (Figure 1). Monthly GDP fell by 0.3% in October, making for a weak start in Quarter 4 (Oct to Dec) 2023, while output was flat in the three months to October.

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