UK GDP Contracts 0.1% in Q3, Retail Sales Rise due to Discounts

Summary

  • The UK’s gross domestic product (GDP) shrunk by 0.1% in the third quarter, according to the Office for National Statistics(ONS).
  • The ONS has revised second quarter growth down to zero from a previous estimate of 0.2%.
  • Retail sales in November saw a significant rise by 1.3% from October, aided by discount sales.
  • The UK’s currency, Sterling, climbed against the dollar and euro following these data announcements.
  • Despite the gloomy official figures, Finance minister, Hunt, defended the UK’s economic outlook.
  • He also hinted at potential interest rate decreases in future BoE decisions.
  • Latest ONS tax data indicates that small businesses, particularly in the hospitality and IT sectors, struggled in the second quarter.
  • Retail sales volumes saw a boost due to heavy discounting during Black Friday sales but remain below pre-pandemic levels.

UK’s Gross Domestic Product Sees Fall in Third Quarter

Figures released by the Office for National Statistics (ONS) reveal a contraction in the UK’s GDP of 0.1% during Q3. In addition, the ONS declared that the second quarter had shown stagnant economic growth, in light of a downward adjustment from an earlier estimate of a growth rate of 0.2%.

Upturn in Retail Sales Bolsters November Figures

Parallel dataset exhibited a significant surge in retail sales in November, rising by more than anticipated – a 1.3% increase from October, propelled by lucrative discount sales. Following these data updates, Sterling appreciated against both the dollar and the euro.

Finance Minister Hunt Remains Optimistic

Hunt, the Finance minister, whose party is trailing the opposition by a significant margin in polls ahead of an anticipated election next year, argued that the economic prospects are not as bleak as the revised official data suggests. He asserted that, “The medium-term outlook for the UK economy is far more optimistic than these numbers suggest.”

Hunt Hints at Possible Interest Rate Reductions

In an exclusive interview with the Financial Times, Hunt took the uncommon measure of discussing future Bank of England(BoE) interest rate policies, suggesting the possibility of a reduction in rates if inflation can be controlled.

Impact on Small Businesses

ONS findings from newer tax data reveal that smaller businesses, specifically in the IT and hospitality sectors, found the second-quarter challenging. The broader economic picture remained unchanged over the past year. Although discount-fueled sales during Black Friday boosted retail sales, they were still beneath their pre-pandemic levels.

In summary, by keeping a check on inflation, the Bank of England may decide on a reduction in interest rates. This could potentially impact the forex market and the value of assets tied to the pound.

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