The UK economy economy returned to growth in November, driven by the service industry, albeit at a slightly slower rate than expected.
GDP rose by 0.1%, according to the ONS, while economists had expected 0.2% growth. In October, GDP fell by 0.1%. The economy stagnated in the three months to November compared with the three months to August.
Services output grew by 0.1% in November after falling by 0.1% in October, revised lower from no growth, but showed no growth in the three months to November, the ONS said.
Production output fell by 0.4%, after October’s fall of 0.6%. It was down by 0.7% in the three months to November, driven by a decline in manufacturing. Construction output grew by 0.4% in November, after a fall of 0.3% in October (revised up from a fall of 0.4%); construction also grew by 0.2% in the three months to November.
Also taking some of the pressure off Rachel Reeves, the chancellor, was an unexpected drop in December inflation, announced yesterday, raising expectations for a Bank of England rate cut next month, and reducing UK borrowing costs.
After a tough week for the government on the economy, official figures showed inflation unexpectedly cooled in December to 2.5%, down from 2.6% in the previous month, meaning prices rose at a slower rate. Lifting some of the pressure on the chancellor as she sought to talk up Labour’s growth agenda, the latest snapshot sent the yield – in effect the interest rate – on UK government bonds tumbling at the fastest rate since 2023.
With 10-year gilt yields falling by almost 0.2 percentage points to about 4.7%, the sharp decline erased nearly all of the increase of the past seven days, when turmoil in the bond market had forced Reeves to contemplate spending cuts to meet her fiscal rules.
In other good news, a net balance of +7% of surveyors reported higher house sales growth in December, up from +1% in November, according to Rics. Enquiries from new buyers were also up, though at a slower rate than in November and October. New instructions, which measures properties placed for sale, saw a bounce, ahead of stamp duty changes in March, with a net balance of +14% reported, marking the sixth consecutive month of increases in houses being listed for sale.
House prices are now going up in every region of the UK. Northern Ireland and Scotland report the strongest price growth currently.
In the lettings market, tenant demand has stabilised. Surveyors and estate agents expect further rent rises (+37%), as more landlords are selling up (net balance +37% from +29% in November) leading to a lack of properties for renters. So while demand is broadly flat, supply is diminished, leading to a lack of available property to rent and price rises.
The agenda
• 9am GMT: Italy trade for November and final inflation for December
• 9.30am GMT: Bank of England credit conditions survey
• 10am GMT: Eurozone trade for November
• 1.30pm GMT: US retail sales for December and initial jobless claims for latest week
We'll be tracking all the main events throughout the day … |
