UK economy contracts unexpectedly – Michael West
The UK economy unexpectedly shrank in the three months to October, according to official figures that are likely to raise expectations for a Bank of England interest rate cut.
The Office for National Statistics (ONS) said gross domestic product contracted by 0.1 per cent in the August-October period.
Economists polled by Reuters had forecast a flat reading.
In October alone, the economy contracted by 0.1 percent, contrary to forecasts of a 0.1 percent increase.
While single-month GDP figures are volatile and subject to revision, Friday’s data mean the economy has not grown since June.
This underlined the difficult economic environment finance minister Rachel Reeves faces as she prepares the massive tax increase budget she announced on November 26.
Sterling fell slightly against the US dollar, driven by data showing unexpectedly sharp declines in the services sector as well as construction.
Friday’s data also casts doubt on the BoE’s expectation that the economy overall will grow by about 0.3 percent in the fourth quarter.
Investors on Thursday put the odds of the BoE cutting interest rates on Dec. 18 at roughly 90 percent.
Manufacturing output, damaged by the cyber attack on Jaguar Land Rover in September, has not recovered as economists had hoped.
The ONS said retailers in particular had had a bad month, which was one reason services output contracted by 0.3 per cent in October despite forecasts for a flat reading.
In response to the data, the finance ministry said it was determined to beat forecasts for growth and good job creation.
The ONS said economic output was 1.1 per cent higher in October compared with a year ago, weaker than economists had predicted a 1.4 per cent expansion.
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