The UK economy shrank by 0.2% in the three months to September - which is expected to be the first step of a major recession.
Chancellor Jeremy Hunt warned it will mean "extremely difficult decisions" as he prepares to announce £21bn in tax rises and £33bn in public spending cuts in next week's austerity Autumn Statement.
The Office for National Statistics said there was a "slowing the services, production and construction industries". Services shrank to "flat output" and production fell 1.5%.
Brits' household spending fell by 0.5% as cost of living pressures began to bite.
The fall was partly blamed on the bank holiday for the Queen's State Funeral - with GDP shrinking 0.6% in September alone.
But the Bank of England has already warned the UK is heading for its longest period of uninterrupted decline that the nation has experienced for around a century.
Last month the central bank raised the base rate from 2.25% to 3% - the highest since the global financial crash of 2008 and sending the cost of mortgages soaring.
And it warned the economy could fall into eight quarters in a row of negative growth on possible trends at the time.
A recession is defined as two quarters in a row of a shrinking economy.
Chancellor Jeremy Hunt today claimed the problem is "largely driven by Putin’s illegal war in Ukraine and his weaponisation of gas supplies".
He added: “I am under no illusion that there is a tough road ahead – one which will require extremely difficult decisions to restore confidence and economic stability.
"But to achieve long-term, sustainable growth, we need to grip inflation, balance the books and get debt falling. There is no other way."
But Shadow Chancellor Rachel Reeves said: “Today's numbers are another page of failure in the Tories' record on growth. And the reality of this failure is family finances crunched, British businesses left behind and more anxiety for the future.
“Britain’s unique exposure to economic shocks has been down to a Conservative led decade of weak growth, low productivity and underinvestment and widening inequality."
It comes hours after bitter Kwasi Kwarteng lashed out at “distressed and emotional” Liz Truss ’s “mad” decision to sack him as Chancellor.
The top Tory claimed he warned the 49-day Prime Minister to “slow down, slow down” as the pair of them crashed the economy in September.
Despite personally boasting there was more to come after his mini-Budget, which sent markets into a tailspin, he claimed: "I said, ‘You know, we should slow down, slow down’.
“She said, ‘Well, I've only got two years’ and I said, ‘You will have two months if you carry on like this’.”
Lib Dem Treasury spokesperson Sarah Olney said: "Today's figures show the Conservative Government is leaving our economy smaller and all of us poorer.
"People will never forgive this Government for crashing our economy during a cost-of-living crisis and putting up their mortgages by hundreds of pounds a month.
"The Conservative Party can never again claim that they are the party of sound money."
Business group the CBI urged the Government to "learn the lessons" of the last decade, with lead economist Alpesh Paleja warning a downturn "could last for most of the coming year.
"Even accounting for an extra bank holiday in September, it's clear that underlying activity has weakened."
ONS director of economic statistics Darren Morgan said: "The quarterly fall was driven by manufacturing, which saw widespread declines across most industries.
"Services were flat overall, but consumer-facing industries fared badly, with a notable fall in retail."
Federation of Small Businesses (FSB) National Chair Martin McTague said: “The Government next week at its Autumn Statement must not just balance the books – it has to have a clear set of measures that will help boost prosperity, growth and jobs.
"Without it, in a year’s time we will be back here again, with an even smaller economy, looking once again for spending cuts and tax rises."
David Bharier, Head of Research at the British Chambers of Commerce, said: “The Chancellor’s Autumn Statement must reassure the financial markets after the recent self-inflicted turmoil.
"But businesses need to see a long-term economic plan that invests in people, skills, and infrastructure and radically improves our trading relationships with key markets, not least across Europe.”
