United Kingdom: The UK economy contracted for the second consecutive month in October, marking the first back-to-back decline in gross domestic product (GDP) since the onset of the COVID-19 pandemic.
The Office for National Statistics (ONS) reported a 0.1 percent month-on-month shrinkage in GDP, mirroring September’s decline.
This consecutive contraction underscores ongoing economic challenges, reminiscent of the downturn experienced during the first coronavirus lockdown in March and April 2020.
In October, the services sector stagnated, while manufacturing and construction output experienced declines. Additionally, separate trade data revealed a drop in imports and exports of goods.
GDP fell 0.1% in October 2024. Services showed no growth, while Production (-0.6%) and construction (-0.4%) both fell.
Read the full release ➡️ https://t.co/xHSGkRpgGz pic.twitter.com/IfK4LPeJrw
— Office for National Statistics (ONS) (@ONS) December 13, 2024
Finance Minister Rachel Reeves acknowledged the disappointing figures but expressed confidence in long-term economic growth strategies. Reeves’ budget, presented on October 30, introduced significant tax hikes for businesses alongside increased investment and public service spending. The budget’s impact on GDP is expected to become evident in November’s data.
Sterling dropped slightly against the US dollar following the GDP data release. Markets continue to anticipate approximately three quarter-point interest rate cuts by the Bank of England (BoE) by the end of 2025.
However, Paul Dales, Chief UK Economist at Capital Economics, suggested the BoE is unlikely to lower rates at its upcoming meeting, though confidence in this outlook has diminished post-data release.
The BoE recently revised its 2024 annual growth forecast to 1 percent, down from 1.25 percent, but expects growth to rebound to 1.5 percent in 2025. However, economists warn of risks stemming from rising global policy uncertainties and waning business confidence.
“Rising budgetary pressures, combined with a weakening export climate, raise significant concerns about sustaining growth momentum,” said Hailey Low, Associate Economist at the National Institute of Economic and Social Research (NIESR).
Among the major advanced economies, Britain remains one of the slowest to recover from the pandemic, with only Germany posting comparably weaker performance, impacted by surging energy costs following Russia’s invasion of Ukraine.
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