The UK economy unexpectedly contracted by 0.1 per cent in October, marking its second consecutive monthly decline, according to official data from the Office for National Statistics (ONS).
Economists had expected a return to modest growth after the fall of September, but uncertainty ahead of the October budget and continued high interest rates prevented consumers and businesses from spending freely.
The ONS noted a particularly weak month for pubs, restaurants and retailers, while some professional services sectors such as property, law and accountancy firms filed work ahead of the Chancellor’s Budget announcement.
Councilor Rachel Reeves described the figures as “disappointing” but stressed that policies were in place to deliver long-term growth. Shadow Cabinet Minister Mel Stride said the latest figures reveal the negative impact of government decisions and pessimistic economic messages.
Economists also stressed that the negative impact on growth may not be due solely to budgetary effects. Paul Dales, chief UK economist at Capital Economics, said higher interest rates could impact activity more than expected. Although the Bank of England has cut interest rates twice this year, they remain high compared to previous years, further discouraging spending and investment.
Over the past five months, the economy has grown just once, and is now 0.1 per cent lower than it was before Labor took office in July. Despite October’s weak figure, some experts, including HSBC’s Simon Wells, warned against reading too much into one month’s data, as initial estimates are often subject to revision.
In the three months to October, the economy managed a slight expansion of 0.1 per cent, providing a glimmer of hope even as the near-term outlook remains uncertain.
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