UK Economy Contracts in October Due to Declines in Production and Construction

December 13, 2024 TruthUSA

In October, there was no growth in the services sector, which accounts for more than 80 percent of total UK economic output.

The latest data suggests that the UK economy shrank in October due to output falls in production and construction, alongside no growth in services.

According to the Friday report by the Office for National Statistics (ONS), GDP contracted by 0.1 percent in October following a 0.1 percent estimated fall in September.

August showed growth of 0.2 percent, following a period of no growth in both June and July. The contraction in October marks the first time the economy has contracted for two consecutive months since March and April 2020, during the onset of the COVID-19 pandemic.

Chancellor Rachel Reeves described the latest growth figures as “disappointing.”

Reeves mentioned on the social media platform X, “However, I’m determined to turn the economy around so it works for working people once again. That’s why we are building 1.5 million homes, creating the National Wealth Fund, and reforming our pensions market to make Britain better off.”

The decrease in the economy was primarily driven by output falls in production and construction. Production output dropped by 0.6 percent in October, while construction fell by 0.4 percent.

Mining and quarrying were significant contributors to the production decline in October, following a 0.5 percent decline in September.

In construction, four out of the nine sectors saw decreases in October. The main contributor to the monthly decrease was private housing repair and maintenance, which fell by 3.8 percent.

Despite the decline in construction output in October, there was growth in September and in the three months leading up to October, by 0.1 percent and 0.4 percent, respectively.

The services sector, which represents the largest proportion of the country’s output and employment, recorded no growth in October, following a stall in September.

The Bank of England closely monitors the output in the services sector to gain insights into the health and trajectory of the UK economy. The bank pays close attention to service sector inflation to assess its alignment with the 2 percent inflation target.

Budget Impact

Liz McKeown, the ONS’s director of economic statistics, noted that despite declines in certain sectors, the economy still grew over the last three months.

She added, “The economy contracted slightly in October, with services showing no growth overall and production and construction both falling. Oil and gas extraction, pubs and restaurants, and retail all had weak months, partially offset by growth in telecoms, logistics, and legal firms.”

The ONS also reported varied responses across industries to the policy announcement in the October Budget.

Manufacturers, wholesalers, and retailers, among other industries, indicated a negative impact from the Budget decisions.

On the other hand, wholesale, real estate, legal services, and accountants mentioned that the Budget had accelerated activity in anticipation of the various announcements.

Recession Watch

Julian Jessop, an economics fellow at the Institute of Economic Affairs, mentioned on X that the GDP data for October “should put the UK firmly on recession watch.”

The last time the UK economy entered a recession was at the end of last year when GDP contracted for two consecutive quarters.

In response to the latest ONS data on trade, William Bain, the head of trade policy at the British Chamber of Commerce, stated that the slowdown aligns with other economic data indicating a decrease in demand.

He further stated, “Trade data from Germany also shows a 2.8 percent fall in goods exports during October, indicating a broader slowdown in global trade.”

Bain urged the government to provide a clear plan to boost export performance in key sectors to drive growth.

Labour aims to make the UK the fastest-growing economy among the G7 nations. Prime Minister Sir Keir Starmer reaffirmed the government’s commitment to enhancing household disposable income across the UK by the end of the parliamentary term.

The government’s Trade Strategy, set for next year, aims to attract investment in high-growth sectors, drive long-term economic growth, and position the UK as a leader in the global market.

Source link