Monday, December 23, 2024

UK economy shrinks for the second month in October

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“That suggests it’s not just the Budget that is holding the economy back,” said Capital’s chief UK economist Paul Dales.

“Instead, the drag from higher interest rates may be lasting longer than we thought.”

The Bank of England has cut interest rates twice this year but, at 4.75%, they are still relatively high compared with recent years.

The Bank will meet next week for the last interest rate decision of 2024, though it is not widely expected to reduce borrowing costs again until next year.

Simon Wells, chief European economist at HSBC, cautioned about placing too much emphasis on the reading for October.

It is an initial estimate of economic growth by the ONS and could be subject to “heavy revision”, he told the BBC’s Today programme.

“So just because it is -0.1% today doesn’t mean it is going to be that when more data has come in in a few months’ time.”

Over the three months to October, the economy expanded by 0.1%.

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