Closing post
Time to wrap up…
Economists are broadly expecting a cut to UK interest rates next week, after Britain’s economy shrank unexpectedly in October.
The economy contracted, for the second month running, as consumers held back on spending before Rachel Reeves’s budget, and car manufacturing struggled to recover from the cyber-attack on Jaguar Land Rover.
Figures from the Office for National Statistics (ONS) showed gross domestic product fell by 0.1%, after a 0.1% drop in output in September. City economists had predicted a 0.1% rise in October.
After a fourth consecutive month without growth, economists said the latest snapshot would probably cement a Bank of England interest rate cut next week amid fading inflationary pressures, fears over the sluggish outlook, and rising unemployment.
The money markets indicate there is a 90% chance that the Bank will cut rates by a quarter of a percentage point to 3.75% when it announces its latest decision on 18 December.
The service sector, and construction, both shrank in October, while production returned to growth.
A Treasury spokesperson said the government was “determined to defy the forecasts on growth”…
.. while shadow chancellor Sir Mel Stride blamed the government’s ‘mismanagement’ of the economy.
The ONS also reported that the UK’s trade deficit widened in October, due to a drop in exports.
If the Bank of England cuts interest rates next week, from 4% to 3.75%, it would bring borrowing costs down to their lowest level since January 2023.
Interest rates started 2023 at 3.5%, before being hiked to 4% in February 2023 as the Bank battled inflation. They reached 5.25% that August, and stayed there for a year until the cutting cycle began in August 2024.
