Will the Bank of England leave interest rates unchanged?
Britain’s economy shrank unexpectedly in October, with monthly gross domestic product (GDP) falling by 0.3%, according to the Office for National Statistics (ONS).
The figures, published a day before the Bank of England decides on whether to keep interest rates high to control inflation, also showed that GDP was flat in the three months to October.
The economic contraction reflects a 0.2% fall in the services sector, particularly in information and communication activity, driven by weaker computer programming activity and a slowdown in film activity. Consumer services, construction output, and production also fell month-on-month, with drops of 0.1%, 0.5% and 0.8% respectively.
GDP was flat (0.0% growth) in the three months to October.
— Office for National Statistics (ONS) (@ONS) December 13, 2023
In the month of October, GDP fell 0.3%.
➡️ https://t.co/k1USftqo5r pic.twitter.com/OUdm9sRpaO
“Our initial estimates suggest that GDP growth was flat across the last three months,” Darren Morgan, director of economic statistics at the Office for National Statistics, commented on the latest GDP figures. “Increases in services, led by engineering, film production and education – which recovered from the impact of summer strikes – were offset by falls in both manufacturing and housebuilding.
“October, however, saw contractions across all three main sectors. Services were the biggest driver of the fall with drops in IT, legal firms and film production – which fell back after a couple of strong months. These were also compounded by widespread falls in manufacturing and construction, which fell partly due to the poor weather.”
“With the Bank of England expecting to leave interest rates unchanged on Thursday, this is shaping up to be a flatline festive period,” said Nicholas Hyett, investment analyst at Wealth Club. “GDP has gone nowhere over a three-month period, as a bleak October offset some more positive numbers from the end of the summer.
“While the crucial services sector has been negatively affected by US actor strikes, which is a bit of a one-off, the rest of the GDP report paints a gloomy picture. Manufacturing is down nearly 1% and house building activity has fallen nearly 5%. With labour markets also showing signs of weakness, another interest rate hike is looking increasingly unlikely.”
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