"With an economy that is far from firing on all cylinders, and inflation, for the moment moderating, much needed rate cuts from the Bank of England look like a real possibility."
- Isaac Stell, investment manager at Wealth Club
November saw the UK economy return to growth for the first time in three months, following a mild contraction at the start of Q4.
Monthly GDP is estimated to have grown by 0.1% in November, following a fall of 0.1% in October.
However, quarterly GDP flatlined, showing no growth in the three months to November, compared with the three months to August.
Despite this, some industry experts believe November's return to growth, coupled with yesterday's falling inflation figure, could prompt the Bank of England to cut rates at next month's meeting.
Richard Pike, chief sales and marketing officer at Phoebus, said: “This is the second consecutive day of encouraging figures on the UK economy from the ONS, as it reveals that the economy grew by 0.1% in November after two months of contraction. This and yesterday’s unexpected dip in inflation should help bolster market and consumer confidence after recent turbulence, giving rise to hopes for a drop in the Bank rate next month."
Jeremy Batstone-Carr, European strategist at Raymond James Investment Services, commented: “The Bank of England’s rate setters will surely take note of today’s data and yesterday’s better-than-expected CPI figures. Whilst a lot can still happen between now and the first monetary policy meeting of the year in three weeks’ time, today’s figures increase the chance of the base rate being lowered.”
Isaac Stell, investment manager at Wealth Club, added: "The UK economy spluttered back to life in November with growth of 0.1%, following two months of negative growth in September and October. The small amount of growth achieved in November will likely take further heat off a chancellor that has been under significant amounts of pressure over the last few weeks.
"The latest figures will be welcomed by the Government, however small they are, and when coupled with yesterday’s inflation undershoot provide a small glimmer of hope. However, Reeves and co will not want to hang out the bunting just yet as challenges certainly remain in the form of upside surprises to inflation and businesses having to shoulder significant rises in national insurance contributions come April. However, with an economy that is far from firing on all cylinders, and inflation, for the moment moderating, much needed rate cuts from the Bank of England look like a real possibility.”
However, others believe that the Bank will continue to take a 'wait-and-see', or gradual approach, to cutting rates.
Luke Bartholomew, deputy chief economist at abrdn, said: “The UK economy looks to have returned to growth in November, but on balance this is another disappointing report. Activity growth has clearly slowed in recent months, and while not yet consistent with a recession there is not enough here to dispel concerns about the outlook especially ahead of the upcoming increase in national insurance. With inflation coming in softer yesterday, the ongoing weakness in growth will further tip the Bank of England towards easing again at its next meeting in February. But even as the economy slows, it is hard to see the Bank shifting away from its “gradual” mantra to a more rapid easing cycle anytime soon.”
Kevin Brown, savings specialist at Scottish Friendly, agreed: “Although it is a welcome sign that the UK economy has recorded the first growth in three months, it appears there remains a long way to go before we see more meaningful growth. That means the economy is now just 1% larger than it was a year ago.
“And with core and services inflation still well above target, it’s starting to feel a lot like we could be in a stagflationary environment for now, something nobody wants.
“Today’s news is unlikely to change anything in terms of interest rates, particularly as early as next month when the Monetary Policy Committee next meet. However, if the economy does not start showing meaningful growth soon, the chorus of voices calling for a reduction in borrowing costs may start to grow even louder.”
