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THE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & LifestyleTHE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & Lifestyle

Economy

Economy

UK economy ekes out 0.1% growth in November, below expectations

The UK’s November 2024 economy grew just 0.1%, highlighting sluggish recovery amid cooling inflation at 2.5%. While the BOE may cut rates in February, persistent challenges like stagnant GDP, weak trade, and global risks cloud prospects. Policymakers face mounting pressure to strategize for sustainable growth and economic resilience into 2025.

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The United Kingdom’s economy continues to tread a precarious path as new data reveals modest growth for November 2024. The Office for National Statistics (ONS) reports that the UK economy expanded by just 0.1% during the month, falling shy of the 0.2% growth projected by economists. While this slight rebound is a reprieve after two months of contraction in September and October, it underscores the significant hurdles businesses and policymakers must overcome to reignite the nation’s economy.

Driving November’s modest growth was the services sector, which provided a critical, albeit limited, lift. However, the broader picture remains gloomy. Over the three months ending in November, gross domestic product (GDP) growth was stagnant, with no overall improvement from the preceding quarter. During the same span, production output contracted by 0.7%, construction posted a meager 0.2% increase, and the services sector failed to gain any traction. These tepid numbers are a stark reminder of the UK’s sluggish recovery amid ongoing economic headwinds as 2025 begins.

Rachel Reeves, the British Chancellor, conveyed optimism despite the less-than-encouraging data. “We’re committed to boosting economic growth through smart investments, structural reforms, and improving public spending efficiency,” Reeves said. She also acknowledged inefficiencies in government expenditures, emphasizing plans to stimulate growth through collaboration with regulators. Yet, skepticism abounds, with critics questioning whether these steps will be enough to jumpstart a noticeably stagnant economy.

Amid these challenges, economists are pondering how the Bank of England (BOE) might respond. Ashley Webb, an economist at Capital Economics, suggests that the BOE could ease monetary policy as slow growth combines with cooling inflation. “The Bank of England is likely to lower interest rates from 4.75% to 4.50% at its upcoming meeting in February,” Webb predicted. Lowering rates could provide much-needed relief for struggling businesses and households, though it comes with its own set of risks.

Meanwhile, a surprising drop in inflation provides a glimmer of relief. Inflation fell to 2.5% in December, down from 2.6% in November, defying expectations. Core inflation, which excludes volatile items like food and energy, also eased, registering 3.2% compared to the previous 3.5%. While this cooling offers some breathing room for policymakers, it doesn’t resolve deeper issues such as wage growth and persistent inflationary pressures, which remain key concerns ahead of the BOE’s February meeting.

Businesses across the UK are feeling the strain of these mixed economic signals. Samuel Edwards, Head of Dealing at Ebury, highlighted the challenges: “The near-stagnant GDP in November underscores the difficulties UK businesses are grappling with. Widening trade deficits and the complexities of global commerce weigh heavily on their performance.” Exacerbating uncertainty is the looming inauguration of U.S. President-elect Donald Trump in January 2025, signaling potential shifts in U.S. trade policy that could influence key export markets for the UK.

The economic lull has provided brief political relief for Prime Minister Keir Starmer’s Labour government. Cooling inflation has softened some criticism surrounding rising government borrowing costs and high taxes. However, the opposition continues to challenge the government’s fiscal strategy, urging more aggressive measures to stimulate growth. As the government seeks to build stronger trade ties with partners like the European Union and China, it remains to be seen whether these efforts can offset external risks and diversify the UK’s trade portfolio.

The British pound echoed the fragile state of the economy, falling 0.2% against the U.S. dollar to trade at $1.2214 following the release of the November GDP report. This market reaction reflects the narrow optimism surrounding the UK’s economic trajectory.

 


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