- The UK economy slowed sharply in the third quarter as supply chain problems and inflation made themselves felt.
- UK GDP grew 1.3%, less than expected and in contrast to growth of 5.5% in the second quarter.
- Economists said rising inflation was worrying households, which are becoming less willing to spend.
UK economic growth cooled sharply in the third quarter as the natural rebound following the lifting of COVID restrictions faded, and as the supply chain crisis and rising inflation made themselves felt.
Gross domestic product grew 1.3% in the July-to-August period, compared with the previous three months. That was considerably slower than the 5.5% expansion in the second quarter. Economists had expected growth of 1.5%.
On a brighter note, the economy in September grew 0.6% month-on-month, the Office for National Statistics said Thursday. Analysts had predicted 0.4% growth.
However, the ONS downgraded its estimate of growth in August, from 0.4% to 0.2%. It did the same for July, revising from a 0.1% fall to a 0.2% drop.
Martin Beck, senior economic advisor to the EY ITEM Club, said the "easy gains" from the reopening of the economy have been exhausted.
"The recovery has entered a much tougher phase. In addition, the situation has been made harder by the escalation of supply chain disruption and the increases in inflation, which will eat into household spending power."
UK GDP remained 0.6% below its February 2020 pre-coronavirus level in September, the ONS said.
The UK economy continued to benefit from the lifting of coronavirus restrictions in the third quarter. But growth came in lower than expected in both July and August as the economy grappled with the supply problems that are affecting countries around the world.
Sanjay Raja, senior economist at Deutsche Bank, said in a note before the data was released that household confidence had cooled in the third quarter, in part because higher inflation was making people nervous.
Inflation surged in August to 3.2% year-on-year, the highest in nine years, and remained elevated in September.
The pound fell after the data release and was last down 0.21% at $1.338, while the FTSE 100 was up 0.29%.