The country is about to slide into recession Britannia as the latest figures show UK GDP contracted suddenly in August. They already confirm his pessimistic assessments. IMF, which predicts on Tuesday that UK GDP will grow by just 0.3% next year. Thus, the difficulties for the new prime minister, Liz Truss, who has promised to accelerate growth, are increasing.

The data showed that a slowdown in production and maintenance work at oil facilities in the North Sea was largely responsible for the 0.3% contraction in UK GDP in August compared to July. The manufacturing sector contracted 1.6% from July levels, while repairs in the North Sea took longer than usual, impacting mining activity, which fell 8.2%. At the same time, the data show that the spike in inflation is hitting consumers with repercussions on consumer spending. About a third of households no longer have savings, according to Pantheon Macroeconomics, and 30% of households with mortgages are expected to cut spending as the cost of servicing their debt rises.

As the manufacturing sector contracted, bond yields rose again.

As Yael Selfin, an economist at KPMG UK, comments, “The continued pressure on household finances continues to dampen growth and was likely the key factor that pushed the UK economy into a technical recession from the third quarter of the year.” But, as the head of economists at the statistical office, Grant Fitzner, noted, “many other sectors of the domestic service industry are not in the best condition, for example, retail, hairdressers and hotels.” As for the data for September, they are expected to show a more weakened economy due to a special holiday, adopted in accordance with the protocol of the funeral of Queen Elizabeth.

Meanwhile, British Treasury bonds are falling and yields are rising, while the pound sterling is falling again, shedding the gains it made when the Bank of England announced an extension of its bond purchases. The reason is that statements by central bank governor Andrew Bailey, who initially assured British banks that the bond buying program would continue, confirmed yesterday that the original schedule will be followed and the bond buying will end tomorrow. He even urged fund managers to close any risky positions by tomorrow as the central bank is not about to offer new support to the market. His remarks caused further market turmoil, with the yield on 30-year British government bonds rising 12 basis points to 4.92%. As market analysts note, the increase in yields is small compared to the past, but this means that 30-year bonds are approaching losses for the eighth day in a row. In short, the turmoil that Finance Minister Kwasi Kwarteng first caused in late September when he announced a “mini-budget” that eliminated the top 45% tax rate on the top earners continues.