The UK’s gross domestic product (GDP) experienced a marginal contraction of 0.1% in the third quarter of 2023, leaving the economy only slightly larger than the same period the previous year. Higher prices and tighter financial conditions contributed to the economic slowdown. The country maintained a net borrowing position of 2.5% of GDP in Q3 2023, with an improvement in net investment income, especially in debt and equity investment.
Labour demand showed signs of cooling, as job vacancies declined for the 17th consecutive period. Annual growth in regular earnings remained high at 7.3% in the three months to October 2023. Headline 12-month consumer price inflation (CPI) slowed to 3.9% in November, while the annual core inflation rate declined for the fourth consecutive month to 5.1%.
Despite the challenges, households increased savings in Q3, reaching 10.1%, higher than pre-pandemic levels. Private non-financial corporations shifted to net borrowing, impacted by lower gross operating surplus and reduced business investment.
The UK’s current account deficit narrowed to 2.5% of GDP in Q3, reflecting an improvement in net investment income, driven by higher global interest rates. The labour market continued to ease, with a decline in job vacancies and a fall in unfilled jobs. Annual growth in regular earnings remained robust at 7.3%.