UK economy flatlines as finance minister decries inflation drag

In Europe

Skyscrapers in the Canary Wharf financial, business and shopping district in London, UK.

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The U.K. economy flatlined in the third quarter, initial figures showed Friday.

Gross domestic product showed no quarterly growth in the the three months to the end of September, following an increase of 0.2% the previous quarter. In annual terms, Britain’s third-quarter GDP was 0.6% higher than in the same period in 2022.

Services sector output dropped 0.1% on the quarter, but the decline was offset by a 0.1% increase in construction performance, while the production sector flatlined.

U.K. Chancellor of the Exchequer Jeremy Hunt said high inflation remains the “single greatest barrier to economic growth” in the country, with the consumer price index remaining at 6.7% year-on-year in September.

“The best way to sustainably grow our economy right now is stick to our plan and knock inflation on its head,” Hunt said.

“The Autumn Statement will focus on how we get the economy growing healthily again by unlocking investment, getting people back into work and reforming our public services so we can deliver the growth our country needs.”

Lindsay James, investment strategist at Quilter Investors, said the Friday figures confirmed an incoming slowdown that has been increasingly signaled by leading indicators in recent months, with consumer spending and business activity showing cracks that have also softened labor demand.

“September’s data did positively surprise thanks to the U.K.’s strong services sector, but was not enough to offset July’s negative print and produce any growth in Q3 relative to the previous quarter. While somehow avoiding a recession this year, today’s no growth reading means the UK economy is flatlining with only 0.2% economic growth in the last six months.” she said.

“Unfortunately, for many the economic pain has only been delayed. As the Bank of England stated earlier this month that more than half of the impact of higher interest rates on the level of GDP is still to come through, the U.K. economy faces growing headwinds as we approach 2024.”

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