What's going on?

Data out on Friday showed that the UK economy shrank last quarter.

What does this mean?

A dastardly duo of wicked prices and rising interest rates is playing havoc with the UK, with the gruesome twosome tanking the economy by 0.2% last quarter. That wince-inducing shrinkage isn�t just down to the extra day off for the Queen�s funeral in September, either: that month�s 0.6% shrink didn�t help matters, sure, but the contraction was already setting in back in August.

The freeze is probably down to a few factors, like feeble manufacturing, dwindling household spending, and underpowered retail sales � those last two are biggies, since consumer spending makes up a burly�chunk of Britain�s economy. Put it all together, and you get the first quarterly fall since the locked-down days of early 2021 � leaving the UK the only G7 country yet to fully recover from the pandemic (tweet this).

Why should I care?

Zooming in: Downhill from here.
Things aren�t likely to improve anytime soon: the Bank of England forecast that last quarter would ring in a recession that could take up to two years to shake, and all signs suggest they�re on the money. Just look at manufacturing firms’ inventories: those handy litmus tests of corporate confidence are being cut across the board, amid fears that the cost of living crisis will further gut spending.

The bigger picture: Tightening belts.
How deep this recession goes will probably be decided by whether Brits start spending the �200 billion ($235 billion) in savings they�ve put aside since the pandemic began � assuming they actually have a choice. See, with Brits� take-home pay reportedly poised for a hit in next week�s budget, folk might have to start dipping into their savings whether they like it or not. The government�s rumored to be gearing up for a whole raft of tax increases and spending cuts, and the budget�s already being called the biggest tightening in government policy since 2010.