The UK economy contracted again in October, with economic activity in the world’s sixth-largest economy remaining very weak, suggesting further interest rate cuts by the Bank of England in 2025.
Data released by the Office for National Statistics earlier on Friday showed that the UK economy contracted by 0.1% in October, matching the previous month, resulting in an annual growth rate of 1.3%.
This was much weaker than expected, as the October GDP release was expected to rise 0.1% in October, a year-on-year increase of 1.6%.
The Bank of England cut interest rates last month by 25 basis points, cutting the benchmark interest rate to 4.75% from 5%, continuing a recent trend towards easing borrowing costs after rates hit a 16-year high.
This result signals another easing of monetary policy next week, but the Bank of England also has to deal with the first budget from the new Labor government which saw a significant increase in borrowing as well as tax rises.
UK GDP rose 0.1% in the third quarter of 2024, compared to the previous quarter. This was slower than the 0.5% growth in the second quarter.
The International Monetary Fund expects the UK to grow by 1.1% in 2024, which is slower than previous periods but would put the UK in the middle of the pack of the world’s leading countries.
