In further disappointment, the UK economy grew a paltry 0.1% in the third quarter of 2024, in figures issued by the Office for National Statistics on Friday, and therefore significantly less than what experts had estimated at 0.2%. This is the biggest slowdown compared to a 0.5% expansion in the second quarter.
The services sector, still dominating the UK GDP in terms of being the largest contributor to the economy, gained only 0.1% from quarter on quarter. Construction, surprisingly displayed strong growth at 0.8%, and industrial production contracted by 0.2%, all of which point toward weakening economic momentum as the year advances.
This underperformance follows the sharp fall in inflation to 1.7% in September, the lowest rate since April 2021. Meanwhile, this was the first time in over three years that inflation stood below the target rate of 2% set by the Bank of England. That being said, after the inflation rate calmed down a bit, there was ample room in that context for the Bank to drop its interest rate by 25 basis points to 4.75% on November 7.
Despite the low growth figures, however, the Bank of England is able to predict that UK fiscal policies-the taxation policy of the Labour Government would increase the GDP by 0.75 percentage points in the coming year. Anyway, the inflation expectation has risen because of the fiscal plan of the government.
Finance minister Rachel Reeves expressed disappointment over the growth figures for Q3 but added that more reforms and investments are needed for sound recovery of the economy with the creation of jobs.
“We are committed to fostering growth through targeted investment and reform,” she stated.
Economists are increasingly skeptical about the prospect of further rate cuts in December. Suren Thiru of the Institute of Chartered Accountants warned that global economic headwinds and persistent inflation risks may deter the Bank from easing rates again soon.
Meanwhile, the British pound saw a slight uptick of 0.1% against the US dollar following the GDP release, though it dipped by 0.15% against the euro.