Anyway, without a shadow of a doubt, Q4 will confirm what is already obvious - that the UK is in a steep recession and it could prove the worst recession since the Second World War.
Recent data from the Manufacturing sector gives more grim news. Industrial production (manufacturing and mining) fell 1.7% in October. This is a huge monthly fall and gives the biggest annual fall since 1991. Even though industrial output only accounts for 18% of total GDP. It is likely to lead to a large fall in GDP in Q4.
Graph of Manufacturing Output
Manufacturing Output: Source: ONS
What this shows:
- Fall in the Value of the Pound has given little benefit to exporters.
- Interest rates are likely to fall further in 2009
- The downturn in the past few months has been much sharper than anticipated.
- Recently producer prices fell - another indicator of weak demand and an indicator of future deflation
When will the downturn end?
Cuts in interest rates and expansionary fiscal policy will help; but there is always a time lag. Interest rate cuts can take upto 18 months to have an effect. It appears there is a powerful negative momentum in the economy creating a negative downward multiplier effect.