UK (Commonwealth) _ Despite predictions that the economy would rebound from a decline in September, official data indicated a 0.1% decline.
According to the Office for National Statistics (ONS), the retail, restaurant, and pub industries saw “weak months” as activity stopped or decreased. Although the number was “disappointing,” Chancellor Rachel Reeves stated, “We have put in place policies to deliver long-term economic growth.”
“This decline in growth demonstrates the glaring impact of the chancellor’s decisions and constant talking,” stated Shadow Chancellor Mel Stride.
According to Yael Selfin, chief economist at KPMG, both companies and customers held back on spending because of uncertainties ahead of the October 30 budget.
However, the ONS claimed that other sectors, including accounting, law firms, and real estate, submitted work prior to Reeves’ announcement of the budget.
A survey in December gauged consumer confidence and found that people were slightly more optimistic about their own finances for the upcoming year.
However, according to studies from the market research firm GfK, opinions on the economy have not altered since November, indicating that people are unsure of our future.
Neil Bellamy, director of consumer insights at NIQ GfK, summarizes that the persistently pessimistic perception of the UK’s overall economic state is stifling consumer confidence.
After 14 years of Tory rule, Sir Keir Starmer cautioned that the budget would be considered “painful” shortly after taking office as prime minister in July.
Later on, he refuted that he was criticizing the economy.
According to ONS data, the economy has only expanded once in the last five months. GDP was 0.1% lower than it was prior to Labour’s election victory in July, according to Capital Economics.
“That suggests it’s not just the Budget that is holding the economy back,” Paul Dales, chief economist for the UK at Capital, said. Rather, the impact of rising interest rates might be more persistent than initially anticipated.
Even though the Bank of England has lowered interest rates twice this year, they remain high at 4.75% when compared to previous years.
The Bank will meet next week to decide on its final interest rate for 2024, even though it doesn’t expect to lower borrowing prices until the following year.
Economists advised against giving the October reading too much weight. The ONS’s first estimate of GDP growth is subject to revision. The GDP grew by 0.1% in the three months leading up to October.
With a 0.6% decline in activity, the manufacturing sector saw the biggest decline in October, followed by the construction sector, which had a 0.4% decline.
The services sector, which makes up most of the UK economy, did not grow. The proprietor of Twisted Fabric, a menswear store in Hitchin, Hertfordshire, Rick Gaglio, stated that “people are still being careful” and that costs are still relatively high.
Customers are experiencing price increases, which he attributed solely to inflation. Additionally, Mr. Gaglio stated that the summer months saw a slowdown in retail sales because of the unusually rainy weather.
He remarked, “It’s been tough.” Overall, 2024 has been extremely challenging for small businesses, and we would prefer to hear more positive news instead of negative ones. According to Sir Keir, he wants the UK to achieve the G7’s greatest rate of steady economic growth.
He outlined other “milestones” last week so that citizens could gauge the government’s advancement. He has committed to raising real disposable income per person for households in order to improve the economy.
In addition, he restated his pledge to construct 1.5 million houses in England. In Q3 2024, the UK economy as a whole saw a 0.8% decline in productivity over the previous quarter. It was 1.8% lower than it was the year before.
After rising 1.5% between August and September of 2024, the value of sterling remained constant between September and October of the same year. It is 5.4% higher than it was a year ago.
During the three months, the UK’s trade deficit was £10.6 billion. In conclusion, rising interest rates and budget concerns cause the UK economy to grow at a slower rate of 0.1%. Due to high interest rates and uncertainty around Labour’s first budget, corporate and consumer expenditure in the UK slowed to a near stop in the third quarter.
