UK May Be In Recession After Economy Shrinks In Q3

The UK economy may be in recession, with Chancellor of the Exchequer Jeremy Hunt taking the rare step of cutting interest rates after data showed a contraction between July and September.

Gross domestic product (GDP) shrank 0.1% in the third quarter, the National Bureau of Statistics said.

The agency had previously estimated that the economy had stagnated in the previous three months, and economists in a Reuters poll had expected another zero reading.

Likewise, the estimate for second quarter GDP is now stable, a reduction from the previous forecast of 0.2% growth.

However, there were some more optimistic signs about the economy in separate data released on Friday, which showed that retail sales rose more than expected in November, up 1.3% from October. , driven by discount sales.

The increase in retail sales volumes reflected heavy discounts during Black Friday promotions. Sales fell in the three months to November and were below their pre-pandemic levels, the statistics agency said.

Finance Minister Hunt – with the Conservatives lagging far behind opposition Labor in opinion polls and an election due next year – took the unusual step of commenting on the central bank’s interest rate decisions.

“If we’re on the trend, if we can get inflation down, the Bank of England may decide to start cutting interest rates,” Hunt told Financial. The Times published Thursday night.

While the recent slowdown in UK inflation has helped fuel bets in financial markets that interest rates will drop to 3.75% by the end of next year, the Bank of England has insisted that talk of a cut is premature. Compared to its current 15-year high of 5.25%.

After Friday’s numbers, Hunt issued a statement saying the outlook for the economy is not as dire as the numbers suggest.

((Translation Redação São Paulo, 55 11 5047 2984))