The British economic system unexpectedly contracts by 0.1% in October

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The British economic system unexpectedly contracted by 0.1 % in October, on account of a drop in output, dealing a serious blow to the Labor authorities’s financial program.

The month-to-month variation of GDP launched Friday by the Workplace for Nationwide Statistics was decrease than the 0.1 % growth forecast by economists polled by Reuters. This follows a contraction of 0.1 % the earlier month.

The pound sterling was down 0.29 % towards the greenback instantly after the information was launched.

The figures underline the financial problem going through the brand new Labor authorities, which received the UK’s common election in July with a transparent dedication to “ship the very best sustained progress within the G7”.

“We’re dedicated to financial progress, as a result of increased progress means increased residing requirements for everybody, in every single place,” Chancellor Rachel Reeves mentioned on Friday.

“Though this month’s figures are disappointing, we now have put in place insurance policies geared toward guaranteeing long-term financial progress,” she added.

Final week, the OECD lowered its progress forecast for the UK for 2024 to 0.9 per cent, from 1.1 per cent forecast in September, on account of weak information availability.

Nevertheless, it expects progress to speed up to 1.7 % in 2025. This determine is weaker than the two.4 % growth forecast for the USA, however increased than 1.3 % for the euro zone.

Figures launched on Friday point out a weak begin to the fourth quarter, after financial progress slowed to 0.1 % within the three months ending in September, from 0.5 % within the earlier quarter.

Output within the dominant providers sector recorded no progress in October, with output contracting 0.6 % and development recording a decline of 0.4 %.

ONS director of financial statistics Liz McKeown mentioned: “Oil and gasoline extraction, pubs, eating places and retail all had weak months, partly offset by progress in telecommunications, logistics and authorized companies. »

Separate information launched Friday by analysis agency GfK confirmed client confidence remained weak in November, rising only one level to -17 in December.

British Prime Minister Sir Keir Starmer not too long ago introduced that he would contemplate family disposable revenue as a brand new “step” to evaluate the success of his financial coverage.

Excessive borrowing prices are nonetheless limiting family spending and enterprise exercise, however they’ve fallen from their peak after the Financial institution of England lower rates of interest in August and November to the present degree of 4, 75 %.

Markets count on additional price cuts subsequent yr as inflation eases from its multi-decade excessive in 2022.

Within the three months to September, GDP per individual, a measure of residing requirements, was nonetheless 0.7% beneath its degree within the fourth quarter of 2019, earlier than the pandemic, highlighting the impression on progress of Covid-19 and the price of residing. disaster over the previous 5 years.

Marion Amiot, senior economist at S&P International Rankings, mentioned: “We count on disinflation and price cuts to spice up progress within the UK over the following 12 months, as customers draw down their financial savings and companies will profit from decrease financing prices. »

This can be a growing story