UK economy stagnates in Q3 but avoids onset of recession, Reuters reports

UK economy stagnates in Q3 but avoids onset of recession, Reuters reports
© Reuters. View of London 10/25/2023. REUTERS/Susannah Ireland/File photo

By William Schomberg and Andy Bruce

LONDON (Reuters) – The economy stagnated in the third quarter but at least managed to avoid the onset of recession, figures from the Office for National Statistics showed on Friday.

The 0% change in gross domestic product in the third quarter from the previous three months was slightly better than a 0.1% drop forecast in a Reuters poll of economists, a result many analysts said represented the start of a recession.

Paul Dales, chief economist at consultancy Capital Economics, said a breakdown of the data showed a marginal decline in GDP of 0.02%, although the figure was rounded to show no change.

“But the bottom line is that the economy is not weak enough to quickly reduce core inflation and wage growth,” Dales said.

“Therefore, we do not expect the Bank of England to be able to cut interest rates until the end of 2024 rather than the widely expected mid-2024.”

ING’s James Smith said the economy was spared a contraction as net imports remained generally volatile while consumption and business investment fell.

The agency’s data is preliminary and subject to review.

Last week, the central bank said it expected zero economic growth next year — a difficult scenario for Prime Minister Rishi Sunak, who is calling national elections in 2024 — but kept interest rates at their highest level in recent years. For 15 years, it continues to face an inflation rate more than three times its 2% target.

The Bank of England, whose 14 consecutive interest rate cuts to August acknowledge economic pain in the nearly two years, expects a steady reading of GDP in the third quarter.

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