Goldman Sachs cut its full-year 2023 UK GDP forecast to 0.3% from 0.5% previously after the UK economy contracted at an unexpectedly sharp pace in July.
The Office for National Statistics announced a contraction in GDP of 0.5% in July, worse than all expectations in the poll conducted by Reuters, which indicated a contraction in GDP of 0.2% from June.
Output rose by 0.5% in June, and the economy grew by 0.2% during the three months ending in July.
The pound fell about a third of a cent against the dollar due to data showing that all major sectors of the economy - services, manufacturing and construction - declined in July.
The data confirmed signs of weakness in the British economy, perhaps more than the Bank of England had expected before its interest rate meeting in September.
The data, released on Tuesday, showed a faster rise in the unemployment rate than the central bank expected, although the Bank of England remains concerned that strong wage growth will fuel continued inflation.
Neil Birrell, fund manager at Premier Mitton, said the speed of the slowdown could indicate a British recession is just around the corner.
While Samuel Tombs, chief British economist at Pantheon Macroeconomics consulting firm, rules out that today's data is the beginning of a downward trend, given the factors driving the decline in production.
The Office for National Statistics said that the health sector was the largest driver behind the decline in service production by 0.5%, and schools in England also witnessed strikes.
The Office for National Statistics added that unusually wet weather in July hurt output for both the retail and construction sectors, which fell 0.5%.
