THE UK economy grew just 0.1% in November, less than expected by economists.
The latest figures from the Office for National Statistics (ONS) reveal Gross Domestic Product (GDP) rose marginally in November.
This comes after it fell by 0.1% in both September and October – the first time the economy had contracted for two consecutive months since March and April 2020.
GDP measures the value of goods and services produced in the UK, it also estimates the size and growth of the economy.
The return to growth will come as a boost to the Government following recent market turmoil as borrowing costs soared and the value of the pound plummeted, eased slightly by slowing inflation.
However, many economists had been predicting GDP to rise more than 0.1% in November.
GDP increased largely due to the services sector, which rose by 0.1%.
The production sector shrank by 0.4%, offset by construction, which grew by 0.4%.
Liz McKeown, director of economic statistics at the ONS, said: “Services grew a little, with wholesaling, pubs and restaurants and IT companies all doing well, partially offset by falls in accountancy and business rental and leasing.
“Construction also grew, led by new commercial developments, while production continued to decline in November with further falls across a range of manufacturing industries and oil and gas extraction companies.”
The latest figures mark a small shift in the outlook for the economy after revised figures revealed the UK economy flatlined in the third quarter of last year.
Data on GDP for the final quarter of 2024 will be published in February, with the Bank of England predicting it will show no growth.
[bc_video account_id=”5067014667001″ application_id=”” aspect_ratio=”16:9″ autoplay=”” caption=”What is the Bank of England base rate and how does it affect me?” embed=”in-page” experience_id=”” height=”100%” language_detection=”” max_height=”360px” max_width=”640px” min_width=”0px” mute=”” padding_top=”56%” picture_in_picture=”” player_id=”default” playlist_id=”” playsinline=”” sizing=”responsive” video_id=”6349322895112″ video_ids=”” width=”640px”]GDP is one of the main indicators used to measure how well an economy is performing.
When it goes up, it means the economy is doing well, when it falls it means the economy has shrunk.
It’s worth bearing in mind, that the GDP figures published by the ONS today are estimates and may be revised up or down in the future.
The data comes a day after the ONS said inflation slowed to 2.5% in the 12 months to December, down from 2.6% in November.
Inflation measures how much the price of everyday goods and services is rising and reflects in the cost of living.
[authenticated-scripts src=”%3Cscript%20class%3D%22palin-poll%22%20src%3D%22https%3A%2F%2Fwww.thesun.co.uk%2Fpollingwidgets%2Fv3%2Fwidget.js%3Fquestion_id%3D102967%26game%3Dpolling%22%3E%3C%2Fscript%3E” type=”embedded” width=”100″ /]But while the latest inflation figures show it is slowing, there are fears the UK could be heading towards “stagflation” – a period of no GDP growth and stubborn inflation remaining above the BoE’s 2% target.
Commenting on today’s GDP figures, Chancellor Rachel Reeves said: “I am determined to go further and faster to kick-start economic growth, which is the number one priority in our plan for change.
“That means generating investment, driving reform and a relentless commitment to root out waste in public spending, and today I will be pressing regulators on what more they can do to deliver growth.
“After 14 years of economic stagnation, this Government’s number one mission is to grow our economy.
“I will fight every day to deliver that growth and put more money into working people’s pockets.”
What it means for your money
GDP measures the economic output of companies, individuals and Governments.
If it is rising steadily, but not too much, it’s a sign of a healthy and prosperous economy.
This is because it usually means people are spending more, the Government gets more tax and workers get better pay rises.
It also generally means lower inflation as companies don’t have to hike their prices to cover shortfalls in their coffers.
The Bank of England (BoE) also uses GDP and inflation as key indicators when determining the base rate.
This decides how much it will charge banks to lend them money and is a way to try to control inflation and the economy.
Usually, when inflation is low, the BoE cuts interest rates to try to speed the economy up.
However, the Government’s decision to increase employer National Insurance contributions (NICs) from 13.8% to 15% next April has raised fears inflation could rise and dampen GDP.
This is because there are expectations businesses won’t be able to absorb the costs and will pass this on to consumers which will see prices rise.
This could lead to the BoE not cutting interest rates as much as previously thought and could mean households’ money not going as far as before.
The central bank is next meeting on February 6 to decide what to do with the base rate, with it expected to lower it.
The upcoming hike to employer NICs could also lead to businesses freezing recruitment or letting staff go.
Alice Haine, personal finance analyst at Bestinvest, said: “Signs of trouble are already evident with job vacancies continuing to slide, business confidence in tatters and redundancies on the rise.
“If employers continue to trim staffing levels, instigate hiring freezes or look to rein in pay rises to offset rising costs, this could have negative consequences on the health of the economy.”
If the UK economy continues to grow, as it did in November, it means it will avoid falling into a recession, classed as two-quarters of shrinking growth.
The UK was last in a recession at the end of 2023 when the final six months of the year saw the economy shrink.
Despite the figures published today showing GDP grew in November, Luke Bartholomew, deputy chief economist at abrdn, still branded them “disappointing”.
He warned the upcoming hike to employer NICs could see the economy suffer.
Luke said: “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 (employer) National Insurance.”