The UK economy almost flattened in October, with Reuters raising doubts about the rate hike

By William Schomberg and Andy Bruce

LONDON (Reuters) – Britain’s economy has barely grown since October, when the Omicron coronavirus variant appeared, and the Bank of England (BoE) has raised expectations that interest rates will rise next week for the first time since the pandemic.

Gross domestic product grew by just 0.1%, slowing sharply from 0.6% in September and much weaker than the 0.4% forecast in a Reuters survey of economists.

The world’s fifth-largest economy in the early 2020s was 0.5% lower than what Britain had previously hit in COVID-19, the National Statistics Office said.

“We have always accepted that there may be blows on the path to our recovery,” said Finance Minister Rishi Sunak, adding that Britain’s economic aid measures and vaccination program would keep the recovery on track.

In the three months to October, the economy grew by 0.9%, the slowest since the blockade in early 2021, the ONS said.

“The health or economic pain of this crisis has lost hope that Christmas will end,” said James Smith, research director of the Resolution Foundation think-tank.

INFLATION

“The chances of tightening cuts, along with high inflation and rising energy bills, mean the government needs to prepare for the new financial support that may be needed in the coming months.”

Sandra Horsfield of Investec did not comment, saying that the weakness was due to supply chain problems rather than declining demand. “We wouldn’t consider it a worrying sign for the outlook,” he said.

Sterling has fallen for investors as the BoE tries to balance inflationary pressures with Omicron’s uncertainty, hoping to keep interest rates back next Thursday.

The BoE survey showed that public inflation expectations for next year rose in November, but in the long run, the bank’s main focus has changed little.

Economists cut their short-term growth forecasts after Friday’s data.

JP Morgan’s Allan Monks predicted GDP growth of 0.9% in the fourth quarter and first three months of 2022, down from its previous 1.3% and 1.0% forecasts before falling back in the spring.

A strong rebound in the UK economy earlier this year – after a nearly 10% drop due to the pandemic in 2020 – plagued supply chain problems over the summer and is expected to lose further strength as new COVID-19 cuts slow down. Omicron variant.

The weak growth in October was due to the steady rise in appointments in English doctor’s surgeries, which fell sharply during the pandemic, contributing to a 0.4% increase in production in the UK’s main services sector.

However, industrial production fell by 0.6% as a result of electricity and gas production and the maintenance of oil fields.

The manufacturing sector was flat between supply chain problems and labor shortages. Construction fell the most since April 2020, 1.8% less than in September.

In particular, the ONS released trade data showing that the UK’s trade in goods deficit fell to £ 13.9 billion in October from £ 14.7 billion in September.

($ 1 = £ 0.7570)