UK economy recovers from royal funeral blockbuster, outlook remains bleak | Bot To News

  • UK GDP rose 0.5% in October after falling 0.6% in September
  • Public holidays around the Queen’s funeral affect the GDP pattern
  • Finance Minister Hunt sees a “tough road” ahead.
  • The biggest drop in 3-month GDP since the start of 2021
  • Warm weather and consumer behavior may have affected energy consumption

LONDON, Dec 12 (Reuters) – Britain’s economy expanded slightly more strongly than expected in October compared with September, when output was hit by a one-off public holiday for Queen Elizabeth’s funeral, but recession remained on the horizon, official data showed on Monday.

Gross domestic product rose by 0.5% after a 0.6% drop in September, the National Statistics Office said.

A Reuters poll of economists pointed to a 0.4 percent return.

The figures are unlikely to change the opinion of investors and analysts that the UK economy is in for a bleak year ahead in 2023. British financial markets did not react to the figures.

“Despite October’s growth, a significant turnaround in policy-making and/or global conditions would be needed to reverse Britain’s downward economic trajectory,” said George Lagarias, chief audit economist at Mazars.

Reacting to the data, Chancellor of the Exchequer Jeremy Hunt said there was a “tough road ahead”.

“Like the rest of Europe, we are not immune to the aftershocks of COVID-19, Putin’s war and high global gas prices,” he said.

Britain’s economy shrank 0.3% in the three months to October, a smaller drop than the average forecast for a 0.4% contraction in a Reuters poll, but the biggest drop since the start of 2021, when the country was under tight restrictions due to coronavirus.

The Bank of England – which looks set to raise interest rates for a ninth consecutive meeting on Thursday to limit risks from inflation above 11% – said last month that the UK economy looked set to enter a two-year recession if interest rates raised rates as much as investors appreciated.

Even without further interest rate hikes, the economy would contract in five of the six quarters through the end of 2023, they said.

“Too aggressive monetary tightening could risk worsening the financial outlook for businesses and households and prolong the looming recession,” said Suren Thiru, director of economics at ICAEW, the accountancy trade body.

The ONS said the economy was 0.4% bigger in October than before the pandemic started.

The ONS said electricity and gas consumption was the biggest drag on economic growth in October, which was the seventh warmest on record according to the Met Office.

“The estimated fall may also indicate some changes in consumer behavior in response to recent increases in energy prices,” the ONS said.

October’s increase in the number of vaccinations against covid-19 added 0.1 percentage point to the monthly increase in GDP.

Reporting by Andy Bruce; Editing by William Schomberg and Hugh Lawson

Our Standards: The Thomson Reuters Trust Principles.

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