UK inches closer to technical recession as growth is revised down

LONDON — The U.Ok. is edging nearer to recession after revised figures confirmed the economic system shrank within the earlier quarter.

U.Ok. gross home product (GDP) fell by 0.1% between July and September, a downward revision from the sooner estimate of flat development, based on new knowledge launched Friday by the Workplace for Nationwide Statistics.

There was additionally zero development within the prior three months, the brand new figures confirmed, down from the 0.2% development beforehand calculated.

Knowledge due out in February will present whether or not the U.Ok. has entered a technical recession — outlined as when the economic system shrinks for 2 consecutive quarters.

Responding to the revisions Friday, Finance Minister Jeremy Hunt insisted that the “medium-term outlook for the U.Ok. is much extra optimistic than these numbers counsel.”

Nonetheless, analysts mentioned it exhibits that the U.Ok. has to date simply “scraped by” with no recession.

“Progress is weakening and rates of interest are actually starting to chunk and whereas a recession has simply been prevented so far, there isn’t a assure one can be prevented in 2024,” Richard Carter, head of mounted curiosity analysis at Quilter Cheviot, mentioned in a be aware.

“Inflation has eased greater than anticipated and rate of interest predictions are suggesting extra easing than initially thought in 2024, however the harm might have already got been achieved. Definitely, Rishi Sunak’s pledge to develop the economic system is now severely doubtful,” he mentioned.

That would put additional strain on the Financial institution of England to chop rates of interest before deliberate in a bid to shore up a weaker economic system.

Higher-than-expected knowledge launched Wednesday confirmed that inflation hit 3.9% in November, elevating hypothesis that the central financial institution might reduce charges within the spring.

Prime Minister Rishi Sunak has made rising the economic system certainly one of his key pledges this 12 months. Downing Avenue mentioned it is going to be met if GDP will increase within the three months to December versus the earlier quarter.

A near-term drop in rates of interest can be a win for Sunak’s authorities, because the U.Ok. enters an election 12 months.

Nonetheless, the BOE’s governor Andrew Bailey has insisted that charges might have to stay “increased for longer” after holding them regular at 5.25% on the last coverage assembly of the 12 months.