Shoppers and visitors on London’s Oxford Street brave the bad weather using Union Flag umbrellas on 6th May 2024.
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The U.K. economy grew a meager 0.1% in the third quarter, according to preliminary figures from the Office for National Statistics.
Economists polled by Reuters expected the economy to have grown 0.2% over the July-September period, following an expansion of 0.3% in the second quarter.
Month-on-month, the economy shrank by 0.1% in September, following no growth in August (which was revised down from a 0.1% expansion in the ONS’ previous data).
“Growth slowed further in the third quarter of the year with both services and construction weaker than in the previous period. There was also a further contraction in production,” Liz McKeown, director of Economic Statistics at the ONS, said on Thursday.
Across the quarter as a whole manufacturing drove the weakness in production, the ONS said, highlighting the cyber attack on Jaguar Land Rover, which halted production for five weeks, as a major source of economic disruption.
“There was a particularly marked fall in car production in September, reflecting the impact of a cyber incident, as well as a decline in the often-erratic pharmaceutical industry,” McKeown said in comments posted on social media platform X.
The data comes ahead of the British government’s highly anticipated Autumn Budget on Nov. 26, at which Finance Minister Rachel Reeves is expected to announce fresh tax hikes in order to fill a fiscal black hole.
There are concerns that tax hikes could put a dampener on consumer spending and economic activity but the economy could get a pre-Christmas boost if the Bank of England cuts interest rates at its last meeting of the year on Dec. 18.
At its most recent meeting last week, the central bank held off trimming rates with BOE Governor Andrew Bailey telling CNBC that he and the bank’s monetary policy committee wanted to see another batch of inflation and labor market prints before acting.
Rob Wood, chief U.K. economist at Pantheon Macroeconomics, was among the economists expecting a Christmas rate cut whether the latest GDP data showed a bounce, or not.
“We believe the MPC [BOE’s monetary policy committee) would reduce rates in December even with an upside GDP surprise, as a likely contractionary Budget on November 26 dominates its deliberations,” Wood said in emailed analysis ahead of the GDP data.
“But growth is proving resilient, running close to the U.K.’s potential of 0.3% quarter-to-quarter despite strong headwinds from fiscal and global uncertainty.”
Wood believed that resilient growth would limit the emergence of spare capacity, making it trickier for the BOE to cut interest rates again in 2026, although some economists predict there could be two rate cuts next year.
This is a breaking news story, please check for further updates.