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LONDON: Britain’s economy stagnated in the third quarter, official data showed on Friday (Nov 10), weighed down by elevated inflation and interest-rate hikes.
Gross domestic product showed no growth in the July-September period, the Office for National Statistics (ONS) said in a statement.
That beat market expectations for a contraction of 0.2 per cent, but followed 0.2-per cent expansion in the second quarter.
The data comes one week after the Bank of England froze interest rates at a 15-year high of 5.25 per cent to tackle high inflation, and forecast the economy would flatline next year.
Reacting to Friday’s data, UK finance minister Jeremy Hunt warned that “high inflation was the single greatest barrier to economic growth”.
Hunt added that his budget statement on Nov 22, would “focus on how we get the economy growing healthily again”.
“UK WOES”
“UK economy woes continue,” noted KPMG economist Yael Selfin.
“Economic activity is continuing to slow as high interest rates are weighing on consumer sentiment and disposable incomes.
“While real incomes have started to grow as inflation eases, this is being offset by higher mortgage rates feeding through into housing costs.”
The ONS added Friday that activity grew 0.2 per cent in September after downwardly-revised expansion of 0.1 per cent in August and zero growth in July.
“The economy is estimated to have shown no growth in the third quarter,” said ONS economic statistics director Darren Morgan.
“Services dropped a little with falls in health, management consultancy and commercial property rentals. These were partially offset by growth in engineering, car sales and machinery leasing.”
There was also a boost from manufacturing, led by cars and metal products while construction also expanded.
Output has been slammed by soaring inflation, which has sparked a cost-of-living crisis, and the BoE’s aggressive hikes since late 2021, when rates stood at just 0.10 per cent.
Rate hikes have worsened Britain’s cost-of-living squeeze because retail lenders follow suit by hiking the cost of repayments on mortgages and other loans.
RESILIENT PERFORMANCE
Economists said after the latest figures that the UK may avoid recession, defined as two successive quarters of contraction.
“The economy narrowly avoided contracting in the third quarter, and we continue to think that it can maintain this resilient performance in the fourth quarter,” said Samuel Tombs, chief UK economist at research consultancy Pantheon Macroeconomics.
“We continue to think that the chances of a recession look low.”
UK inflation remained elevated in September, holding at 6.7 per cent and stoking fear that interest rates could stay higher for longer.
It has slowed dramatically since hitting a 41-year peak of 11.1 per cent in October 2022, when energy bills rocketed after key producer Russia’s invasion of Ukraine.
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