UK economy shrinks before election year

LONDON - Britain's economy unexpectedly shrank in the third quarter and flatlined in the previous three months, official data showed Friday, raising fears of a recession before an election due next year.

The downbeat news delivers a blow to Conservative Prime Minister Rishi Sunak, who trails opposition Labour leader Keir Starmer in the polls despite a sharp slowdown of inflation.

Gross domestic product (GDP) contracted 0.1 percent between July and September on sliding services output, down from a prior estimate of zero, the Office for National Statistics (ONS) said in a statement.

Activity was hit by the Bank of England's aggressive interest-rate hikes, which are aimed at curbing elevated inflation and easing a cost-of-living crisis.

The ONS added that the economy turned flat in the second quarter, slashing its previous estimate of 0.2-percent expansion.

That sparked speculation over a potential recession which is defined as two straight quarters of negative economic growth.

"The fall in real GDP in the third quarter may mean that the mildest of mild recessions started," noted Capital Economics analyst Ashley Webb.

"But whether or not there is a small recession, the big picture is that we expect real GDP growth to remain subdued throughout 2024."