U.K. Economy Unexpectedly Contracted in October; GDP Dropped 0.1%
GlendonThe U.K. economy unexpectedly remained in contraction in October, with uncertainty ahead of the Autumn budget by Chancellor Rachel Reeves likely curtailing growth.
The U.K. economy unexpectedly remained in contraction in October, with uncertainty ahead of the Autumn budget by Chancellor Rachel Reeves likely curtailing growth.
Data released earlier Friday by the Office for National Statistics showed that U.K. gross domestic product fell by 0.1% on a monthly basis in October, matching the drop seen during the prior month and below the 0.1% growth expected.
On an annual basis, the U.K. economy expanded by 1.1% in October, matching the growth seen the previous month and below the 1.4% growth expected
The manufacturing sector reported growth of 0.5% in October, rebounding from the hefty 1.7% drop the previous month, boosted by the restart of operations at Jaguar Land Rover's factories early in the month, after a cyber attack.
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The uncertainty surrounding the Autumn budget, delivered by U.K. finance minister Rachel Reeves in November, likely deterred businesses and consumers alike from making investment decisions.
In the end, Reeves did raise taxes to give her greater room to meet her deficit-reduction targets as well as fund higher welfare spending, but not by as much as had been feared.
As a result, the Confederation of British Industry earlier Friday lifted up its economic growth forecast for next year, citing a temporary boost to government spending following the budget.
The business association predicted the U.K. economy will grow 1.3% next year, up from its previous forecast of 1.0% in June, and also lifted its forecast for this year to 1.4% from 1.2%, reflecting upward revisions to recent official data.
"While it's welcome to see our growth forecast upgraded for next year, the mood music reads more 'cautious optimism' than 'cause for celebration'," CBI chief economist Louise Hellem said.
The Bank of England holds its final policy-setting meeting of the year next week, and is widely expected to cut interest rates by a quarter point to 3.75% as recent data has shown inflation drifting lower.
British inflation fell in October for the first time since May, to 3.6% from 3.8%, in line with the central bank's expectations, and November data due next week could show a further drift downwards.
The BOE held interest rates unchanged at 4.0% in November, but this was a close call with four out of the nine policymakers voting for a rate reduction.
