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Britain’s Economy Stagnates in Q3, Avoiding Recession, Office for National Statistics Reports

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UK Economy Avoids Recession with 0% Growth in Q3: Office for National Statistics

The UK economy managed to avoid sliding into a recession in the July-to-September period, but its sluggish growth remains a concern, according to figures released by the Office for National Statistics (ONS) on Friday. The data revealed that gross domestic product (GDP) remained unchanged at 0% in the third quarter, defying expectations of a 0.1% contraction predicted in a Reuters poll of economists.

Although the flat growth figures came as a relief to many analysts who had feared a recession, some experts argue that the rounded figure conceals a marginal decline of 0.02% in GDP during the third quarter. However, the overall picture suggests that the UK economy is not weak enough to significantly impact core inflation and wage growth.

Paul Dales, chief economist at consultancy firm Capital Economics, explained, “The key point is that the economy is not weak enough to reduce core inflation and wage growth quickly. As such, we don’t expect the Bank of England will be able to cut interest rates until late in 2024 rather than in mid-2024 as widely expected.”

The Bank of England (BoE) recently announced that it anticipates zero economic growth in the coming year. This challenging backdrop poses a significant dilemma for Prime Minister Rishi Sunak, who is widely expected to call a national election in 2024. Despite the economic uncertainties, the BoE has chosen to maintain interest rates at a 15-year high as it battles an inflation rate that is more than three times its 2% target.

In the three months leading up to September, the ONS reported a 0.1% growth in construction, while industrial production remained broadly flat. However, the UK’s enormous services sector experienced a 0.1% decline in output during the same period.

Responding to the latest data, Finance Minister Jeremy Hunt acknowledged that high inflation remains the biggest obstacle to growth. He pledged to unveil plans in his November 22 budget update statement to unlock investment and re-engage individuals in the job market.

Despite the challenges, the ONS highlighted that the UK economy stands 1.8% above its pre-pandemic level in late 2019. This recovery, although lagging behind that of the United States, which has seen over 7% growth from its pre-pandemic level, surpasses the performance of Germany.

The latest GDP figures paint a mixed picture of the British economy, with concerns over stagnant growth and high inflation. As the government and the Bank of England work to address these challenges, all eyes will be on the upcoming budget update statement for potential solutions to kickstart investment and foster job creation.

More detail via Investing.com UK here… ( Image via Investing.com UK )

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