UK economy shrinks again in October ahead of Budget tax hikes
Speculation that taxes will be raised weighs heavily on households, which power roughly 60% of the economy
[LONDON] The UK economy contracted again in October, underscoring fears that Chancellor of the Exchequer Rachel Reeves’ Budget has curbed momentum.
Gross domestic product fell 0.1 per cent in October, the Office for National Statistics said, repeating September’s 0.1 per cent contraction.
Economists surveyed by Bloomberg expected a growth of 0.1 per cent.
The services sector decreased 0.3 per cent and construction decreased 0.6 per cent in October, offset partly by a 1.1 per cent rebound in industrial production.
The pound edged lower after the data, dropping 0.1 per cent to US$1.3381.
The report suggests that the economy entered the final quarter stuck in the slow lane, with Britain struggling to recapture the momentum it enjoyed in the first half of the year, when it outpaced every other Group of Seven country.
Speculation that Reeves would have to raise taxes has weighed heavily on households, which power roughly 60 per cent of the economy. Retail sales dropped more than expected in October as consumers reined in spending ahead of the Budget.
The GDP figures are the first in a run of data that will show how the UK economy is performing at the start of the fourth quarter, setting the stage for the Bank of England’s final meeting of the year on Dec 18.
Policymakers, heading into what is expected to be a knife-edge call on a rate cut, will get fresh jobs and inflation readings in the days leading up to the decision. BLOOMBERG
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