UK Economy Contracting Again

Investing.com – The UK economy contracted again in October, with economic activity in the sixth largest economy in the world remaining very subdued, pointing to further interest rate cuts by the Bank of England in 2025.

Data released earlier Friday by the Office for National Statistics showed that the UK economy contracted by 0.1% in October, matching the prior month, resulting in an annual growth rate of 1.3%.

This was a lot weaker than expected, as the October GDP release had been anticipated to rise 0.1% in October, showing an annual increase of 1.6%.

The BoE cut interest rates last month by 25 basis points, reducing its base rate to 4.75% from 5%, continuing a recent trend toward easing borrowing costs after rates reached a 16-year high.

This result indicates another easing of monetary policy next week; however, the Bank of England must also deal with the first budget from the new Labour government, which has seen a dramatic increase in borrowing as well as tax rises.

The UK's gross domestic product increased by 0.1% in the third quarter of 2024, compared to the previous quarter, which was slower than the 0.5% growth in the second quarter.

The International Monetary Fund forecasts that the UK will grow by 1.1% in 2024, which is slower than previous periods but would position the UK in the middle of the pack among the world’s leading nations.