London-Britain’s economy unexpectedly shrank in the third quarter and flatlined in the previous three months, official data showed Friday, raising fears of a recession before an election due next year.
The downbeat news delivers a blow to Conservative Prime Minister Rishi Sunak, who trails opposition Labour leader Keir Starmer in the polls despite a sharp slowdown of inflation. Gross domestic product (GDP) contracted 0.1 percent between July and September on sliding services output, down from a prior estimate of zero, the Office for National Statistics (ONS) said in a statement. Activity was hit by the Bank of England’s aggressive interest-rate hikes, which are aimed at curbing elevated inflation and easing a cost-of-living crisis. The ONS added that the economy turned flat in the second quarter, slashing its previous estimate of 0.2-percent expansion. That sparked speculation over a potential recession which is defined as two straight quarters of negative economic growth.
“The fall in real GDP in the third quarter may mean that the mildest of mild recessions started,” noted Capital Economics analyst Ashley Webb. “But whether or not there is a small recession, the big picture is that we expect real GDP growth to remain subdued throughout 2024.”
UK inflation slows to fresh two-year low at 3.9pc
London, Dec 20 (Agencies):British inflation has slowed sharply to the lowest level in more than two years on falling petrol prices, official data showed Wednesday, easing a cost-of-living crisis after aggressive interest-rate hikes.
The Consumer Prices Index hit 3.9 percent in November from 4.6 percent the previous month, touching a low last seen in September 2021, the Office of National Statistics said in a statement.
The news handed a further boost to embattled Prime Minister Rishi Sunak after inflation had already achieved his goal of falling below five percent in October.
“Inflation eased again to its lowest annual rate for over two years, but prices remain substantially above what they were before the invasion of Ukraine,” said ONS chief economist Grant Fitzner.
“The biggest driver for this month’s fall was a decrease in fuel prices after an increase at the same time last year. “Food prices also pulled down inflation, as they rose much more slowly than this time last year.” November also marked a sharper slowdown than market expectations of 4.3 percent, but the rate is nevertheless almost double the Bank of England’s official target of 2.0 percent.
The news comes one week after the BoE froze its key interest rate at a 15-year peak of 5.25 percent -- but warned that it will remain elevated to tackle stubbornly high consumer prices. Inflation had surged to a 41-year peak at 11.1 percent in October 2022, stoked by spiking energy prices after the invasion of Ukraine by major oil and gas producer Russia and sparking a cost-of-living squeeze in Britain.