The U.K. economy expanded by a modest 0.1% in November, according to data released by the Office of National Statistics (ONS) on Thursday. This reading has raised expectations that the Bank of England will move forward with an interest rate cut next month. Economists surveyed by Reuters had anticipated a 0.2% month-on-month growth.
In October, monthly real gross domestic product (GDP) decreased by 0.1%, following a similar decline in September and a growth of 0.2% in August. The ONS attributed the slight growth in economic output in November mainly to the services sector, marking the first positive sign in the U.K.’s broader economy in three months.
British Chancellor Rachel Reeves expressed determination to accelerate economic growth by focusing on investment, reform, and reducing public spending waste. The ONS reported that real GDP showed no growth in the three months leading up to November, with services remaining stagnant, production declining by 0.7%, and construction growing by 0.2%.
Following the GDP release, the British pound depreciated by 0.2% against the dollar to $1.2214. The Bank of England is contemplating a potential interest rate reduction at its upcoming meeting on Feb. 6, considering factors such as wage growth, economic uncertainties, and the inflation target of 2%.
Economists believe that the recent data supports the case for a rate cut next month. The Labour government and Treasury have faced challenges related to rising government borrowing costs and fiscal plans. However, a recent inflation report showed a lower-than-expected consumer price growth of 2.5% in December, with core inflation at 3.2%.
The U.K. economy has been under scrutiny due to concerns about slow growth and challenges from external and internal factors. The government’s efforts to strengthen trade ties with the EU and China aim to diversify export opportunities and enhance long-term economic resilience.
