The UK economy returned to growth in November for the first time since August, but expansion was weaker-than-expected, offering little respite to embattled Chancellor Rachel Reeves.
The Office for National Statistics (ONS) estimated the UK economy grew in November by 0.1% after falling by 0.1% in both September and October.
While a welcome return to growth, most economists were expecting gross domestic product (GDP) to rebound by 0.2% in November.
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The figures follow a difficult past couple of weeks for the Chancellor, after government borrowing costs surged and the value of the pound slumped amid worries over the economy and UK debt levels.
Markets calmed on Wednesday, with the sell-off on government bonds falling back thanks to a surprise fall in inflation, giving some breathing space to Ms Reeves.
But November’s paltry growth means the economy would need to expand by at least 0.1% in December just to avoid contracting overall in the final quarter of the year, underscoring the task ahead for the Chancellor.
Ms Reeves acknowledged it would take time to revive the UK economy.
She said: “This new Government has come in with a determination, a number one mission, to grow the economy. That takes time.”
“Combined with investment and reform, I’m determined – and I’m confident – that we can grow our economy and make people better off,” she added.
She is holding a meeting with regulators in No 11 on Thursday as she attempts to cut red tape and remove barriers to investment to kickstart sluggish growth.
Ms Reeves and Business Secretary Jonathan Reynolds will gather the bosses of the Competition and Markets Authority, Ofcom, Ofwat, Ofgem, the Office of Rail and Road, the Environment Agency and the Civil Aviation Authority to look at reforms to the way they work.
It comes amid mounting fears the economy is heading for a period of so-called stagflation, where there is little or no economic growth combined with persistent inflation.
The Bank of England has pencilled in no growth again for the fourth quarter, following zero expansion in the previous three months.
And while figures on Wednesday showed inflation edging back to 2.5% last month from 2.6% in November, many economists believe it will rise close to 3% in the coming months.
The November GDP figures take in the period after Ms Reeves’ first Budget on October 30, which saw her announce £40 billion of tax rises including a hike in employers’ national insurance.
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Businesses have warned prices will need to rise to offset the cost hit while hiring may also be affected.
Ms Reeves defended her Budget decisions, insisting “the most important thing to grow the economy is returning stability” which she had done by addressing the public finances.
But concerns over her policies, the economy and rising public sector debt levels sent yields on government bonds, also known as gilts, to decades-high levels in the past week.
Gilt yields remained largely stable on Thursday after the GDP data, while the pound was 0.3% lower at 1.22 US dollars, having hit 14-month lows of 1.21 dollars earlier in the week.
HSBC’s senior UK economist Liz Martins said the “mood music is not great” with the UK economy stagnating.
She told BBC Radio 4’s Today: “We had zero growth in the third quarter of this year, a bad start to the fourth quarter, and this number hasn’t done enough to offset that bad start.
“So it does suggest that we’re going to have very low or zero growth for the final quarter as well.
“We’re not in recession but we’re not doing much growing either.”
But the lower-than-forecast data for November, combined with Wednesday’s unexpected fall in inflation, is seen as boosting chances of an interest rate cut when the Bank next decides in February.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said: “The MPC will now certainly cut rates in February.”
However, he said with inflation set to start heading back up, there may be fewer cuts over the year as a whole.