The National Gallery and the church St. Martin’s in the Fields at dusk. Trafalgar Square, London, UK
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The U.K. economy grew at a lackluster pace of 0.1% in November, data from the Office of National Statistics showed Thursday.
This compares with the 0.2% month-on-month growth expected by economists polled by Reuters.
Monthly real gross domestic product (GDP) fell by 0.1% in October, following a decline of 0.1% in September and growth of 0.2% in August.
The ONS said the slight growth in economic output in November was largely due to growth in the services sector. While meager, the data is the first sign of life in the U.K.’s wider economy for three months.
British Chancellor Rachel Reeves said in a statement after the data Thursday that she was “determined to go further and faster to kickstart economic growth.”
“That means generating investment, driving reform and a relentless commitment to root out waste in public spending, and today I will be pressing regulators on what more they can do to deliver growth,” she said in emailed comments from the Treasury.
The ONS nevertheless said the real GDP is estimated to have shown no growth in the three months to November, compared with the three months to August.
“Services showed no growth over this three-month period, while production fell by 0.7% and construction grew by 0.2%,” the ONS said in the data release.
The British pound fell 0.2% against the dollar to trade at $1.2214 following the GDP print, which comes as the Bank of England considers whether to lower interest rates at its next meeting on Feb.6.
Next Bank of England move
A cooler-than-expected annual inflation print for December, out Wednesday, fueled broad expectations of a 25-basis-point rate cut when the central bank meets.
Such a trim would bring the key interest rate from 4.75% to 4.5% although BOE policymakers will be factoring in inflationary pressures, such as resilient wage growth and uncertainty over Britain’s economic outlook. The central bank’s inflation target is 2%.
The Labour government and Treasury have been under pressure in recent weeks amid rising government borrowing costs and questions over their fiscal plans and higher tax burden on businesses. Both were given something of a reprieve on Wednesday, however, when the latest inflation data showed consumer price growth had cooled more than expected to 2.5% in December,┬аwith core price growth slowing further.
The print came in below the expectations of economists polled by Reuters, who had anticipated the inflation rate would remain unchanged from the 2.6% reading of November.
Core inflation, which excludes more volatile food and energy prices, came in at 3.2% in the twelve months to December, down from 3.5% in November.
The U.K.’s inflation rate had hit a more than three-year low of 1.7% in September, but monthly prices had accelerated since then on the back of higher fuel costs and the price of services.┬аIn December, the annual services inflation rate stood at 4.4%, down from 5% in November.
The U.K. economy has found itself in a tight spot of late, with economists voicing concerns over┬аthe country’s sluggish growth prospects┬аand worries over headwinds caused by both external factors, such as potential trade tariffs once President-elect Donald Trump takes office on Jan. 20, along with┬аinternal fiscal and economic challenges that have dogged the Labour government and Treasury since the October budget.
“The near stagnation of GDP in November has dampened the optimism sparked by yesterday’s unexpected drop in inflation. Meanwhile, the widening trade deficit highlights the persistent challenges faced by UK businesses as they contend with an increasingly complex global landscape,” Samuel Edwards, head of Dealing at global financial services firm Ebury, said in emailed comments Thursday.
“The incoming U.S. administration brings both opportunities and challenges. While uncertainty around policy direction persists, there is optimism that closer trade ties could unlock significant potential in one of the UK’s largest markets,” he noted.
The government’s efforts to strengthen links with the EU and China, Edwards noted, “reflect a clear strategy to diversify export opportunities and enhance long-term economic resilience.”
Correction: This article’s headline has been updated to reflect the U.K. economy grew by 0.1% in November. A previous version had misstated the figure.
