Time to wrap up – here are today’s main stories so far:

America’s third-quarter GDP report has been revised… upwards.

US GDP expanded at an annualised rate of 3.2%, the Bureau of Economic Analysis reports. That’s equivalent to a quarterly rate of 0.8%.

Previously, the increase had been estimated at 2.9%, or just over 0.7% on a q/q basis.

The data has been revised higher due to “upward revisions to consumer spending and nonresidential fixed investment” that were partly offset by a downward revision to private inventory investment, the BEA says.

That’s a contrast with the UK, which (as we learned this morning) shrank by 0.3% in Q3, more than first feared.

Here’s some early reaction, first from Liz Ann Sonders, chief investment strategist at Charles Schwab:

Louise Haigh, Labour’s shadow secretary of state for transport, has condemned the decision to lift regulated fares by 5.9% next March as “a sick joke for millions reliant on crumbling services”.

Regulated rail fares in England will rise by up to 5.9% next March, the Department for Transport has announced.

The rise is being capped at a level below inflation “to help reduce the impact on passengers”, the transport secretary said.

At 5.9%, the cap is 6.4 percentage points below July’s Retail Prices Index measure of inflation (which has previously been used to set fair increases). It is in line with average earnings growth that month.

The government says this is the biggest ever intervention to keep rail fares down, “due to unprecedented levels of inflation”, and will reduce the impact of high inflation for passengers.

Fares will officially rise on 5 March 2023, and will be frozen in January and February “giving passengers more time to purchase cheaper flexible and season tickets at the existing rate”.

The DoT says a rise is needed to support investment, and the financial stability of the railway.

Transport Secretary Mark Harper says:

This is the biggest ever government intervention in rail fares. I’m capping the rise well below inflation to help reduce the impact on passengers.

It has been a difficult year and the impact of inflation is being felt across the UK economy. We do not want to add to the problem.

This is a fair balance between the passengers who use our trains and the taxpayers who help pay for them.

The UK housing market has also weakened, according to property website Zoopla today.

Zoople reports that momentum in the market is falling away rapidly, with the three-month house price growth rate having more than halved to just 0.3%.

Demand for homes is down by 50% year-on-year, it reports, as buyers hold out to see what the market and economic outlook is in January.

The slowdown is focused in rural and coastal areas where prices surged in the pandemic, in the ‘race for space’ as families looked for larger properties further from major cities.

But some urban areas, such as Bradford, Swindon, Coventry, Crewe, Southend and Milton Keynes, are still recording above average demand for homes in places.

Zoopla predicts that UK house prices could fall by up to 5% in 2023, adding:

Whilst buyer interest has fallen sharply, committed buyers still remain in the market.

Nationwide Building Society has also predicted a 5% drop next year, although other economists forecast larger declines due to higher interest rates.

Chancellor of the Exchequer Jeremy Hunt has responded to this morning’s downgraded GDP data, pointing to the surging prices caused by the Ukraine war:

“High inflation driven by Putin’s invasion of Ukraine is slowing economic growth across the world. No country is immune, least of all Britain.

“Getting prices down so people’s wages go further is my top priority, which is why we are holding down energy bills this winter and providing extra cost of living payments for the most vulnerable.

“To get the British economy back on track, we have a plan that will help to more than halve inflation next year, while laying the foundations for long-term growth through record investment in infrastructure and new industries.”

However, as flagged earlier, other major European countries kept growing in the third quarter of this year despite the burden of higher energy prices…..

Concerns over Christmas food prices are also far higher than last year, the Office for National Statistic says.

A new report into rising food prices and the impact on consumers, just released, also shows that around half of all adults in Great Britain report buying less when food shopping.

The rising cost of pasta, bread and other everyday foods are leaving the most vulnerable the worst off, the report shows.

Staple foods, such as breads and cereals, have seen the largest price increases in the last month, increasing by 1.9% in November alone, and were up 16.6% over the last year.

The ONS reports that lower-income households are being hardest hit by rising food costs:

The most vulnerable appear to be the hardest hit, with 61% of those in the most deprived areas buying less food compared with last year, as opposed to 44% in the least deprived areas, according to our Public opinions and social trends data.

With Christmas just days away, over four in five adults (81%) reported to the Food Standards Agency (FSA) that they were concerned about the cost of food during Christmas and New Year – up from 62% in the same period last year.

Rising food prices may even have a knock-on effect on health, with nearly one-quarter (23%) of survey participants saying they skipped or reduced the size of a meal because they could not afford to buy food, according to the FSA.

The UK’s growth malaise is getting worse, fears James Smith, research director at Resolution Foundation.

He’s highighted several worrying points within today’s GDP report:

Investec economist Ellie Henderson has analysed today’s revised UK GDP data, and concludes that risks of a recession have risen.

She explains:

Quarterly national accounts data released for Q3 this morning confirmed that the economy did indeed contract in the third quarter of the year, as was suggested by the first estimate of the data. Indeed, GDP contracted by 0.3%, a slightly larger fall than the -0.2% reported in the initial release.

There were also downward revisions to the back data, with every quarterly growth number back to Q3 2021 revised down by 0.1%pt. The question now is whether the economy manages to eke out growth in Q4 and avoid a recession at the end of the year. If it does escape the recession label, which still looks possible but harder owing to revisions, this would purely be in the technical sense, with weaker momentum in the UK economy still abundantly clear.

2023 looks likely to bring more difficulties, Henderson adds, with recessions likely in multiple major economies, including the UK.

But when combined with an expected decline in inflation, we believe the door will be open to cut rates in the UK towards the back end of 2023 to support the economy, helping economic momentum rebound in 2024.

The wave of strikes across the UK in recent weeks could also hit economic growth this quarter.

Pubs and restaurants in the City of London have reported that sales were cut to almost half pre-pandemic levels during last week’s rail strikes, according to Bloomberg.

They say:

Kate Nicholls, chief executive officer of trade group UKHospitality, said takings were 46% lower in real terms than during the same week in 2019. Four days of strikes caused chaos on train services and convinced many people to work from home.

Across London as a whole, revenue was down 37% last week compared with 2019 and adjusting for inflation, Nicholls said. Hospitality businesses across the UK reported a 30% cancellation rate on bookings, as Christmas parties were called off.

Peter Marks, the chairman of nightclub operator Rekom UK, said sales were down 20% last week. The final weekend before Christmas, traditionally among the busiest, was “substantially down” due to the rail strike on Saturday.

More here.

Our UK strike calendar shows the service stoppages planned for December and January:

More than three-quarters of firms say the government’s post-Brexit trade deal with the EU has not helped them to expand their business in the last two years despite promises that it was an “oven-ready” deal.

A survey by the British Chambers of Commerce (BCC) has prompted the business lobby group to present the government with five urgent recommendations for enhancing the agreement, which has left many exporters struggling to sell into the EU under the current terms.

More than half (56%) of the BCC members surveyed who trade with the EU said they had experienced problems complying with new rules for exporting goods, while 45% reported issues trading in services. Overall, as many as 77% of firms trading under the deal said it had not helped them to increase sales or expand.

The BCC’s director general, Shevaun Haviland, said:

“Businesses feel they are banging their heads against a brick wall as nothing has been done to help them, almost two years after the TCA [trade and cooperation agreement] was first agreed.

The longer the current problems go unchecked, the more EU traders go elsewhere, and the more damage is done.”

The UK has fallen to the bottom in the Group of Seven nations in terms of quarterly economic growth.

The 0.3% contraction in UK GDP in Q3 reported this morning is worse than Japan’s 0.2% fall in GDP, while Canada and the US both expanded pacily, by around 0.7%.

France (+0.2%), Germany (+0.4%) and Italy (+0.5%) all grew in the July-September quarter too.

Labour’s shadow chancellor, Rachel Reeves, tweets:

This morning’s UK Q3’s national accounts paint a gloomier economic picture, says EY ITEM Club.

Here’s their take:

• The national accounts for Q3 showed a slightly bigger 0.3% quarter-on-quarter fall in GDP than initially estimated. The economy’s performance in Q3 wasn’t helped by another fall in household incomes and an unexpected rise in the household saving ratio. GDP growth was also revised lower in each quarter back to Q3 2021.
  

• Scope for a fall in the saving ratio, alongside households’ sizeable cash holdings, will likely offer some support to activity in the near-term. However, the scale of headwinds facing the economy means the EY ITEM Club expects another fall in GDP in Q4, and for recession to persist through the first half of 2023.

Today’s GDP report confirms expectations that the UK economy is heading towards a recession, says Victoria Scholar, head of investment at interactive investor:

“UK final Q3 GDP fell to -0.3% versus the preliminary estimate of -0.2% and expectations for -0.2%, negatively impacted by the additional bank holiday day for Queen Elizabeth’s funeral. The services sector grew by 0.1% but the production sector shrank by 2.5% with real GDP now 0.8% below its pre-pandemic levels, revised down from a previous estimate of 0.4%. Real household disposable income suffered the fourth consecutive quarter of negative growth falling 0.5% in Q3. However the household saving ratio increased to 9% versus 6.7% in the previous quarter.

The data confirms expectations that the UK economy is heading towards a recession given the downward revision to the latest quarterly GDP figure. While the service sector output was revised slightly higher, construction swung into negative territory and manufacturing was revised lower. All three sectors have been trending lower underscoring the widespread impact from the broad-based macroeconomic headwinds.

Households’ savings jumped during the quarter as a result of soaring gilt yields after the mini-budget turmoil which had an impact on pension entitlements. Consumer spending was the weakest since Q1 2021 when we were locked down during covid because of softer expenditure abroad by UK residents. The pressures from inflation, in particular rising energy bills and rent which added to cost-of-living pressures meaning less money was available for other expenditure during the quarter.

Here’s Suren Thiru, economics director at ICAEW:

Another worrying sign in today’s GDP report -– UK business invesment contracted by 2.5% in the third quarter of the year.

It means that business investment (on, say, new machinery or expanding a factory) is over 8% below its levels before the Covid-19 pandemic began.

The ONS says.

Gross fixed capital formation (GFCF) increased by 1.1% in Quarter 3 2022, revised down from a first estimate increase of 2.5%. The latest quarterly rise was mainly driven by a boost in government investment of 17.3%, although business investment is now estimated to have fallen by 2.5% in Quarter 3 2022.

Business investment saw notable revisions to estimates across quarters because of updated survey data.

Business investment remains 8.1% below its pre-coronavirus pandemic level.

Real households’ disposable income fell by 0.5% during the third quarter of this year, as the cost of living crisis hit people, today’s GDP report shows.

That’s the fourth consecutive quarter of negative growth in RHDI, the ONS says.

Although incomes did rise, they did not keep pace with rising prices (‘real’ incomes are adjusted for inflation).

Rising housing costs (such as gas and electricity), transport, miscellaneous goods and services, and food and non-alcoholic beverages all pushed up inflation during the quarter.

The ONS explains:

Within RHDI, nominal gross disposable income rose 1.8%. With the adjustment for the change in pension entitlements not affecting the calculation of disposable income, growth in social benefits other than social transfers in kind, and wages and salaries drove nominal income growth this quarter.

However, the household expenditure implied deflator grew by 2.4%, therefore outpacing nominal income growth. This is weaker inflation growth than seen in the previous quarter as price growth on spending at restaurants and cafes as well as on UK tourist expenditure overseas eased slightly.

Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.

The UK economy shrank faster than first thought over the summer, new data shows, as the country teetered on the brink of recession.

UK GDP shrank by 0.3% in the the third quarter of 2022 (July to September), down from a first estimate of a 0.2% contraction, the Office for National Statistics reports.

Disappointingly, the ONS estimates that UK GDP was still 0.8% below its pre-coronavirus (COVID-19) pandemic level, revised from the previous estimate of being 0.4% below. That means the UK is still lagging behind other G7 countries.

During the third quarter of the year, output across the production sector tumbled by 2.3% – including falls in all 13 manufacturing sub-sectors.

The services sector (the latest segment of the economy) grew by 0.1% while the construction sector shrank by 0.2% (rather than growing as previously thought).

Real household expenditure fell by a revised 1.1% in Quarter 3 2022, which was driven by declines in net tourism, transport, household goods and services, and food and drink.

ONS director of economic statistics Darren Morgan says today’s data shows the economy performed “slightly less well” than previously thought:

The bank holiday for the State Funeral of Queen Elizabeth II in September also hit growth in Q3 – leading to a bounceback in October.

Many economists predict the UK will shrink in the fourth quarter of 2022, which would be a technical recession, and struggle in 2023 too.

John Leiper, chief investment officer at Titan Asset Management says today’s ‘dour’ figures set the scene for the looming 2023 recession:

UK GDP declined meaningfully in the third quarter, down -0.3%. That’s worse than expected and brings the annual number to just 1.9% from 2.4% prior. That is the lowest reading since June 2021 following a sharp rebound in activity coming out of the Covid slump. It is concerning, albeit not too surprising, to see household consumption and total business investment declined meaningfully as the economic environment continues to sour.

This sets the scene for a dour 2023 and is consistent with our expectations for a recession next year.

The agenda

• 9.30am GMT: UK report into “Rising food prices and the impact on consumers”

• 1.30pm GMT: US weekly jobless figures

• 1.30pm GMT: US Q3 GDP report (final estimate)