The UK economy returned to growth in November, expanding by 0.1%, according to the Office for National Statistics (ONS).
This came after a surprise fall of 0.1% in gross domestic product (GDP) in October. However, these latest figures were below the 0.2% growth figure forecast by economists polled by Reuters.
In November, ONS data showed that services grew by 0.1%, while production fell by 0.4% and construction grew by 0.4%.
ONS director of economic statistics Liz McKeown said: “The economy continues to be broadly flat, having grown slightly in November following two small falls in the previous months.”
“Services grew a little, with wholsaling, pubs and restaurants and IT companies all doing well, partially offset by falls in accountancy and business rental and leasing.
“Construction also grew led by new commercial developments, while production continued to decline in November with further falls across a range of manufacturing industries and oil and gas extraction.”
The pound edged nearly 0.2% lower against the dollar (GBPUSD=X) to $1.222 immediately following the release of the data.
CCY – Delayed Quote • USD
1.2206 – (0.00%)
As of 9:26:40 GMT. Market open.
November’s figures point to little improvement in economic growth in the fourth quarter, after slowing to 0.1% in the three months to September, down from 0.5% in the previous quarter. The Labour government won the UK general election in July with a manifesto commitment to “secure the highest sustained growth in the G7”.
Sanjay Raja, chief UK economist at Deutsche Bank (DBK.DE), said: “The UK economy is heading for stagnation not just in the final quarter of last year, but through the entire second half of 2024. Indeed, after registering the fastest economic growth among G7 economies in the first half of 2024, the UK economy will likely register no growth in the second half.”
“Budget uncertainty and inclement weather won’t have helped output,” he added. “Our nowcast models point to growth flatlining in Q4-24, but picking up marginally in Q1-25.”
Lindsay James, investment strategist at Quilter Investors, said: “While the risk of recession remains modest for now, the UK is not yet out of the woods, and in the three months to November the economy flatlined.
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Read more: UK inflation dip opens doors for interest rate cuts
“This weak growth can in part be attributed to the fallout of the government’s budget, which saw consumers hit pause on spending.
“As we move further into this year we could see an even bigger impact. Businesses will soon feel the effects of increased national insurance (NI) contributions, the costs of which are likely to be passed on to employees. Wage growth is expected to take a hit, and spending could be dampened further as a result.”
Chancellor Rachel Reeves announced increases to the national minimum wage and employer NI contributions in the autumn budget. Many retailers have been warning of the impact of these higher costs on their businesses.
Meanwhile, concerns about persistent inflation and debt levels saw a sharp sell-off in UK government bonds — known as gilts — last week. This pushed gilt yields, which are effectively the interest rate of return on these debt investments, higher, meaning the cost of borrowing for the government surged.
However, yields eased back on Wednesday, after separate ONS data showed that UK inflation fell unexpectedly in December to 2.5%. This has potentially opened the door for another interest rate cut by the Bank of England (BoE) next month.
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