Written by Andy Bruce and Suban Abdullah
(Reuters) – Britain's economy contracted for a second month in October in the run-up to the new government's first budget, the first successive decline in output since the onset of the COVID-19 pandemic.
The Office for National Statistics said GDP contracted by 0.1% month-on-month in October, as it did in September.
It was the first consecutive decline in monthly gross domestic product – which is volatile and subject to revision – since March and April 2020, when Britain imposed its first coronavirus lockdown.
Economists polled by Reuters had expected monthly growth of 0.1%.
The services sector stabilized, while production in manufacturing and construction declined in October.
Friday's data adds to a string of worse-than-expected numbers for the British economy, with business surveys and retail sales readings also down.
“While the numbers this month are disappointing, we have put policies in place to deliver long-term economic growth,” Finance Minister Rachel Reeves said in a statement.
Its budget statement issued on October 30 imposed significant tax increases on companies. Its direct impact will be felt in GDP data from November onwards.
An ONS statistician said there was “mixed” evidence on the budget's impact, with some businesses saying their sales had been affected by customers waiting for Reeves' announcement. Others brought up the activity.
The British pound fell by about a quarter of a cent against the US dollar. Investors continued to price in cuts of around 3 quarter points in interest rates from the Bank of England by the end of next year.
Paul Dales, chief UK economist at consultancy Capital Economics, said: “We do not think the economy is weak enough to prompt the bank to follow up on its November interest rate cut with another cut at its next December meeting on Thursday.”
“However, we are not as confident about this as we were before this data was published.”
