Economic Growth Stalls in the UK
The UK’s economy has come to a standstill, with revised figures from the Office for National Statistics revealing zero growth in the three months to September. This marks a significant downturn from the initial estimate of 0.1% growth, and raises concerns about the country’s fiscal strategy.
Pound Takes a Hit
The British pound has fallen against the US dollar, trading at $1.2566 as of 8:37 am London time. This decline is a result of the disappointing economic data, which has dampened sentiment and raised questions about the newly elected Labour government’s ability to stimulate growth.
A Series of Weak Data Prints
The UK economy has been struggling in recent months, with unexpected contractions in October and September. This marks the second consecutive monthly GDP decline for the country, sparking concerns about the overall health of the economy.
Expert Insights
Paul Dales, chief UK economist at Capital Economics, expects the economy to stagnate in the final quarter of 2024. However, he remains optimistic about the prospects for 2025, citing a potential rebound in growth. “Our hunch is that 2025 will be a better year for the economy than 2024,” he said.
Inflation on the Rise
Meanwhile, inflation is on the rise, with the ONS reporting a 2.6% increase in November. This marks the second consecutive month of rising prices, prompting the Bank of England to hold interest rates steady at 4.75%.
Interest Rate Uncertainty
The Bank of England’s decision to hold interest rates steady has sparked debate among traders, with some expecting a rate cut in March and others predicting a hold. The uncertainty surrounding interest rates is likely to continue in the coming months.
Labour Government’s Fiscal Strategy Under Scrutiny
The Labour government’s first budget, unveiled in late October, included plans to raise taxes by £40 billion. The budget has been met with criticism, particularly the hike in employer National Insurance payments, which has sparked warnings from businesses that they will be less likely to take on new workers.
Job Openings Hit
The national insurance payroll tax hike has already had an impact on British job openings, according to a report from recruitment site Indeed. This raises concerns about the potential impact on employment and economic growth.
A Challenging Road Ahead
The UK economy faces a challenging road ahead, with stagnant growth, rising inflation, and uncertainty surrounding interest rates. The Labour government’s fiscal strategy will be closely watched in the coming months, as the country navigates these economic headwinds.
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