U.K. economy shrinks amid stubborn inflation

LONDON — Britain’s economy shrank in the three months through October, confirming the toll that rampant inflation and rising interest rates are having on business and industry.

The United Kingdom’s gross domestic product, the broadest measure of economic activity, fell by 0.3% in the period compared with the three months through July, the Office for National Statistics said Monday.

The decline came even as estimates showed a GDP increase of 0.5% in the month of October, after a 0.6% drop in September, when economic activity was artificially reduced by an extra public holiday to mark the death of Queen Elizabeth II.

Despite the rebound in October, there is still a good chance the British economy will shrink for a second consecutive quarter in the final three months of the year, according to Martin Beck, chief economic adviser to the EY Item Club. Two consecutive quarters of declining output are one definition of a recession.

Britain doesn’t have an independent body that declares recessions like in the U.S. and Europe, which use other data such as rising unemployment and job losses.

“The near-term outlook remains gloomy, as consumers continue to struggle under the weight of high inflation and with much of the impact of this year’s interest rate rises still to be realized,” Beck said in a statement.

Output by productive industries, which range from manufacturing to mining and energy production, dropped 1.7% in the three months through October. Service industries, which account for about four-fifths of the British economy, fell 0.1% in the period.

Consumer price inflation accelerated to a 41-year high of 11.1% in October, fueled by high costs of food and energy. The Bank of England has approved eight consecutive interest rate increases as it struggles to rein in inflation. The effort has pushed the bank’s key rate to 3% from 0.1% a year ago.

Britain doesn’t have an independent body that declares recessions like in the U.S. and Europe, which use other data such as rising unemployment and job losses.