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The UK economy grew at a pace of 0.1% in November, data from the Office for National Statistics (ONS) showed on Thursday, with the reading fueling expectations that the Bank of England will proceed with an interest rate hike next month.
The latest print data compares with the 0.2% monthly growth expected by economists polled by Reuters.
Real monthly gross domestic product (GDP) fell by 0.1% in October, following a 0.1% decline in September and a 0.2% increase in August.
The ONS said that the slight increase in economic output in November was largely due to growth in the services sector. While scarce, the data is the first sign of life in the wider UK economy for three months.
British Chancellor Rachel Reeves said in a statement after the data on Thursday that she was “determined to go further and faster to kick-start economic growth”.
“That means generating investment, driving reform and a relentless commitment to rooting out waste in public spending, and today I will press regulators on what more they can do to deliver growth,” he said in comments sent by the Treasury. .
However, the ONS said that real GDP is estimated to have shown no growth in the three months to November, compared to the three months to August.
“Services showed no growth in this three-month period, while production fell by 0.7% and construction rose by 0.2%.” the ONS said in the data release.
U British pound fell 0.2% against the dollar to trade at $1.2214 after the GDP print, which comes as the Bank of England considers whether to cut interest rates at its next meeting on February 6 .
Economists say the latest data only fuels the case for a rate hike next month, although BOE policymakers will factor in inflationary pressures such as resilient wage growth and uncertainty about Britain’s economic prospects. The central bank’s inflation target is 2%.
“Along with December’s softer-than-expected CPI inflation picture, today’s release revealed that the economy continued to have little momentum towards the end of last year, leaving us content with our view that the Bank of England will cut interest rates from 4.75% to 4.50% in February,” Capital Economics UK economist Ashley Webb said in an emailed note.
Work under pressure
The Labor government and the Treasury have come under pressure in recent weeks amid rising government borrowing costs and questions over its tax plans and the higher tax burden on companies
Both were given something of a reprieve on Wednesday, however, when the latest inflation data showed that consumer price growth had cooled more than expected to 2.5% in December, with the growth of the price of the heart more slowed down.
The press came below the expectations of economists polled by Reuters, who had anticipated that the inflation rate would remain unchanged from the reading of 2.6% in November.
Core inflation, which excludes the more volatile prices of food and energy, rose to 3.2% in the twelve months to December, from 3.5% in November.
The UK inflation rate had hit a more than three-year low of 1.7% in September, but monthly prices have accelerated since then on the back of higher fuel costs and the price of services . In December, annual services inflation was 4.4%, up from 5% in November.
The UK economy has been in a tight spot of late, with economists expressing concerns the country’s slow growth prospects and concerns about headwinds caused by both external factors, such as potential trade tariffs once President-elect Donald Trump takes office on January 20. domestic fiscal and economic challenges that have dogged the Labor government and the Treasury since the October budget.
“The near-stagnation of GDP in November dampened the optimism raised by yesterday’s unexpected fall in inflation. Meanwhile, the widening of the trade deficit highlights the persistent challenges facing businesses in the United Kingdom as content with an increasingly complex global landscape”, Samuel Edwards, Head of Trading at the global financial services company Ebury, said in comments by email on Thursday.
“The incoming US administration brings both opportunities and challenges. While uncertainty about the direction of policy remains, there is optimism that closer trade ties could unlock significant potential in one of the largest markets of the United Kingdom,” he noted.
The government’s efforts to strengthen ties with the EU and China, Edwards noted, “reflect a clear strategy to diversify export opportunities and strengthen long-term economic resilience.”
Correction: The headline of this article has been updated to reflect the UK economy grew by 0.1% in November. An earlier version had misstated the figure.
