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UK financial system nearly flatlined in October, including to price hike doubts By Reuters


© Reuters. Folks look out to the Metropolis of London monetary district from a viewing platform in London, Britain, October 22, 2021. REUTERS/Hannah McKay

By William Schomberg and Andy Bruce

LONDON (Reuters) – Britain’s financial system barely grew in October, even earlier than the emergence of the Omicron coronavirus variant, additional denting expectations that the Financial institution of England (BoE) will increase rates of interest subsequent week for the primary time because the pandemic struck.

Gross home product edged up by simply 0.1%, slowing sharply from September’s 0.6% progress and far weaker than a forecast of 0.4% in a Reuters ballot of economists.

The world’s fifth-biggest financial system remained 0.5% smaller than it was simply earlier than Britain was first hit by COVID-19 in early 2020, the Workplace for Nationwide Statistics stated.

“We have all the time acknowledged there could possibly be bumps on our street to restoration,” finance minister Rishi Sunak stated, including that Britain’s financial help measures and vaccine programme would maintain the restoration on observe.

Over the three months to October, the financial system grew by 0.9%, its slowest since a lockdown in early 2021, the ONS stated.

“Hopes that both the well being or financial ache of this disaster can be throughout by Christmas have been dashed,” stated James Smith, analysis director on the Decision Basis think-tank.

INFLATION

“The likelihood that restrictions will should be tightened, mixed with excessive inflation and rising vitality payments, means authorities ought to put together for recent focused financial help that could be essential within the months forward.”

Sandra Horsfield at Investec sounded much less involved, saying the weak point was principally brought on by international provide chain issues quite than a droop in demand. “We might not regard it as a worrying sign for the outlook,” she stated.

Sterling fell as traders wager that the BoE, searching for to stability inflationary pressures with Omicron uncertainty, will once more maintain rates of interest regular subsequent Thursday.

A BoE survey confirmed inflation expectations among the many public for the approaching 12 months jumped in November however have been little modified for the long term, the financial institution’s principal focus.

Economists lower their near-term progress forecasts after Friday’s knowledge.

Allan Monks at JP Morgan predicted GDP would develop by 0.9% within the fourth quarter and within the first three months of 2022, down from his earlier estimates of 1.3% and 1.0%, earlier than bouncing again within the spring.

A powerful rebound in Britain’s financial system earlier this 12 months – following a near-10% droop in 2020 because of the pandemic – bumped into provide chain issues over the summer time and is anticipated to lose extra momentum due to new COVID-19 restrictions to gradual the unfold of the Omicron variant.

October’s meagre progress was supported by a continued rise in face-to-face appointments at medical doctors’ surgical procedures in England, which had fallen sharply in the course of the pandemic, contributing to a 0.4% rise in output in Britain’s dominant companies sector.

However industrial output fell 0.6% attributable to a drop in electrical energy and fuel manufacturing and oil area upkeep.

The manufacturing sector flat-lined amid provide chain issues and workers shortages. Development fell by essentially the most since April 2020, down by 1.8% from September.

Individually, the ONS launched commerce knowledge displaying that Britain’s items commerce deficit narrowed to 13.9 billion kilos in October from 14.7 billion kilos in September.

($1 = 0.7570 kilos)

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