The UK economy contracted by 0.3% in August

In face of the cost living crisis the UK economy shrank by 0.3% predominately driven by a decline in manufacturing production and consumer services. Consumer-facing services plunged 1.8% whilst manufacturing and production dropped by 1.6% and 1.8% respectively. Soaring input costs, higher interest rates and weakening demand has been the catalyst for this contraction in economic output with the economy now smaller than it was at the start of the year. What is now surfacing are the profound difficulties in consumer-facing sectors as the squeeze on real income is forcing households to adjust their spending decisions as inflation remains to be sticky. Despite the lacklustre output data, markets still expect another mega rate hike of 0.75% from the Bank of England. This will continue to be a major headwind for both businesses and consumers.