Gross domestic product grew by 0.1 per cent in October, down from 0.6 per cent in September, and leaving it at 0.5 per cent below its pre-pandemic level, according to the Office for National Statistics.
The output of the construction industry was hit particularly hard, contracting by 1.8 per cent, the largest fall since April 2020. The ONS attributed this both to inflation impacting prices and supply delays of materials such as steel, concrete and timber.
Production output also slowed, decreasing by 0.6 per cent in October, driven by a 2.9 per cent drop in the electricity and gas sectors.
Chancellor of the Exchequer, Rishi Sunak said: “We’ve always acknowledged there could be bumps on our road to recovery, but the early actions we have taken, our ongoing £400bn economic support package and our vaccine programme mean we are well placed to keep our economy on track.”
The outlook was more positive for the services sector, which grew by 0.4 per cent in the four weeks as the rise in face-to-face GP appointments drove the output of the human health activities sector to 3.5 per cent.
Overall, output from the services industry has reached its pre-pandemic level (February 2020) but within that, consumer-facing services remain 5.2 per cent below the February level.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the data has intensified the interest rate dilemma for the Bank of England.
‘“The latest reading for the economy shows just how vulnerable the economy was to a fresh shock, with output in October growing by just 0.1 per cent: weaker than expected. The spread of the Omicron variant is now set to be the body blow, sending the recovery reeling, while prices continue to climb."
She said although a rate rise could not be completely ruled out next week, most bets were off that the central bank will push them up so soon.
“A rate rise in February is more likely to be on the table, as the inflation kettle is set to be whistling loudly by then. That is unless restrictions are ramped up dramatically, pushing the economy into an even tighter recovery position.’’