UK economy grows by a meager 0.1% in the third quarter, missing expectations
Shoppers and visitors on London’s Oxford Street brave the bad weather using Union Flag umbrellas on May 6, 2024.
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The UK economy grew by a weak 0.1 percent in the third quarter. front figures From the Office for National Statistics.
Economists polled by Reuters had expected the economy to grow 0.2% in the July-September period, following 0.3% growth in the second quarter.
On a monthly basis, the economy shrank by 0.1% in September, following no growth in August (revised downwards from the 0.1% growth in previous ONS data).
“Growth slowed further in the third quarter of the year, with both services and construction weakening compared to the previous period. There was also further contraction in manufacturing,” ONS Director of Economic Statistics Liz McKeown said on Thursday. he said.
The ONS said the weakness in production across all production during the quarter was a major source of economic disruption, highlighting the cyber attack on Jaguar Land Rover, which halted production for five weeks.
“There was a particularly pronounced decline in car production in September, reflecting the impact of a cyber incident and the decline in the often volatile pharmaceutical industry,” McKeown said in comments posted on social media platform X. he said.
The data comes ahead of the British government’s highly anticipated Autumn Budget on 26 November. In this budget, Chancellor of the Exchequer Rachel Reeves is expected to announce new tax increases to fill the fiscal black hole.
There are concerns that tax increases could have a negative impact on consumer spending and economic activity, but the economy could achieve a pre-Christmas revival if the Bank of England cuts interest rates at its final meeting of the year on 18 December.
At its most recent meeting last week, the central bank delayed cutting interest rates after BOE Governor Andrew Bailey told CNBC that he and the bank’s monetary policy committee wanted to see another round of inflation and labor market data before taking action.
Rob Wood, chief UK economist at Pantheon Macroeconomics, was among economists expecting a Christmas rate cut whether or not the latest GDP data showed a rebound.
“With a budget contraction likely on November 26, we believe the MPC (BOE’s monetary policy committee) will cut rates in December even with an upward GDP surprise,” Wood said in an emailed analysis ahead of the GDP data. he said.[BOE’smonetarypolicycommittee)wouldreduceratesinDecemberevenwithanupsideGDPsurpriseasalikelycontractionaryBudgetonNovember26dominatesitsdeliberations”WoodsaidinemailedanalysisaheadoftheGDPdata[BOE’smonetarypolicycommittee)wouldreduceratesinDecemberevenwithanupsideGDPsurpriseasalikelycontractionaryBudgetonNovember26dominatesitsdeliberations”WoodsaidinemailedanalysisaheadoftheGDPdata
“But growth is proving resilient, approaching the UK’s potential of 0.3% quarter-on-quarter despite strong headwinds from financial and global uncertainty.”
Wood believed that resilient growth would limit the emergence of spare capacity and make it difficult for the BOE to cut rates again in 2026; However, some economists predict that there may be two interest rate cuts next year.
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