"It may be down to the BoE to save the day by cutting rates at their December meeting, helping to ease the burden on businesses and consumers alike and deliver some much needed festive cheer."
- Isaac Stell, investment manager at Wealth Club
UK GDP expanded by 0.1% in Q3, a slowdown from 0.5% in Q2, the latest ONS figures show.
Monthly GDP is estimated to have fallen by 0.1% in September, largely because of declines in manufacturing output and information and communication services, after unrevised growth of 0.2% in August.
Production output decreased by 0.5% in September, and was the main contributor to the fall in GDP, while construction sector output rose by 0.1% and services output showed no growth.
Looking over the longer term, GDP is estimated to have increased by 1.0% in Q3 compared with the same quarter in 2023, and by 1.0% in September compared with the same month last year.
Isaac Stell, investment manager at Wealth Club, said: “The UK economy looks to have lost some momentum during the third quarter of 2024, with a slowdown in growth from 0.5% in Q2 to 0.1% for Q3, whilst month-on-month GDP fell by 0.1% in September. The latest figures are likely to open the door to further rate cuts by the BoE before the year end.
"The latest quarterly figures will not help to quell further negativity around the government’s latest Budget following the increase in taxes on businesses which will potentially slow growth even further. With the Government's growth agenda looking increasingly at risk, it may be down to the BoE to save the day by cutting rates at their December meeting, helping to ease the burden on businesses and consumers alike and deliver some much needed festive cheer.”
Lindsay James, investment strategist at Quilter Investors, commented: “With the budget now firmly in the rearview mirror and the Chancellor reinvigorating her message of growth with the Mansion House speech, today’s quarterly GDP figures highlight the malaise the UK still finds itself in. Despite good momentum early this year, growth has stumbled once again, growing just 0.1% over the last three months, with September actually seeing a contraction. Much of this will have been as a result of the gloomy messaging that was persistent in the run up to the budget, causing consumers and businesses to pause spending and await what pain was to come.
“However, it is now not as simple as just getting back on trend. There are rising risks to the UK economy as businesses are being asked to stomach much of the required fiscal expansion. Unemployment figures have ticked up to 4.3% and with NI changes yet to fully bed in, businesses are warning things could get worse. The economic malaise we have become accustomed to could be here to stay a while longer."
Luke Bartholomew, deputy chief economist at abrdn, added: “The economy was always going to slow from the famously “gangbusters” pace of the first half of this year, but the extent of the slowdown is a bit more pronounced than expected. With activity growth in September being reported as particularly weak, it is plausible that some of slowing is the result of elevated uncertainty at that time, as firms and households speculated about possible tax changes ahead of the Budget. That said, it is also possible that this just represents normal monthly volatility rather than anything more fundamental. In any regard, the contents of the Budget ended up somewhat boosting the growth and inflation picture for 2025, and so in that context these data will probably do little to change the thinking at the Bank of England. We continue to expect further gradual easing, with the next rate cut coming early next year.”
