In an unexpected turn, the British economy contracted by 0.1% month-over-month in September 2024, marking its first decline in five months. This was a sharp contrast to the 0.2% rise in August and significantly below forecasts of a 0.2% expansion. The contraction highlights ongoing uncertainties in the UK’s economic recovery, driven by weaker-than-expected performance across several sectors. While growth in August had provided some optimism, September’s figures reflect the pressures still weighing on key parts of the economy.

Weak Manufacturing and Declines in Key Sectors

The main driver of the contraction came from the production output, which shrank by 0.5% in September, reversing the 0.5% growth seen in August. Manufacturing was the most significant contributor to this decline, with output falling by 1%. The sector, which had previously shown signs of recovery, faced new challenges, particularly in industries like automotive, electronics, and machinery. Beyond manufacturing, other sectors also saw negative contributions, including water supply, sewerage, waste management, and remediation activities, which declined by 0.7%. The energy sector also saw a sharp downturn, with a 1.9% decrease in the supply of electricity, gas, steam, and air conditioning.

Services Sector Stalls Amid Declines in Tech-Related Activities

The services sector, which has been a key pillar of the UK economy, showed no growth in September, following a slight 0.1% increase in August. Within services, the most significant setback came from computer programming, consultancy, and related activities, which experienced a sharp 2.6% drop. This decline suggests a slowdown in the technology and digital services industries, which have historically been a source of resilience for the UK economy. While other services industries remained relatively stable, the overall stagnation in services output further dampened the economic outlook.

Construction Shows Modest Growth, but New Work Slows

On a more positive note, the construction sector showed modest growth, increasing by 0.1% in September, although this was slower compared to the 0.6% growth in August. The increase in construction output was largely driven by a rise in repair and maintenance work, which grew by 0.4%. However, new work in the sector faced a decline of 0.2%, signaling that the pipeline of new construction projects may be slowing. This slowdown in new work could have longer-term implications for the UK’s infrastructure and housing markets, which have been key contributors to overall economic activity.

In summary, the UK economy faced a setback in September 2024, with contractions in key sectors such as manufacturing, energy, and technology services. While construction showed some resilience, the broader economic outlook remains uncertain. As businesses and policymakers continue to navigate these challenges, further developments will be closely monitored. Stay tuned for a more in-depth analysis of these trends and their potential impacts in our upcoming blog post.