Restaurant and Pub on James Street, London, UK, Friday, December 13, 2024.
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The UK economy grew by a stronger-than-expected 0.3% in November, according to data released by the Office for National Statistics (ONS) on Thursday.
Economists polled by Reuters had forecast a very modest growth rate of 0.1%.
Services and production rose 0.3% and 1.1% respectively in November, the ONS said. On the other hand, the construction industry decreased by 1.3% in the same month. Following this data, the pound sterling was almost flat against the dollar, last trading at $1.3433.
The latest data was released after the economy unexpectedly contracted by 0.1% in October. The figure is believed to be due to the continued fallout from the cyberattack at Jaguar Land Rover, which affected car production, and consumer and business uncertainty ahead of the Autumn Budget.
Jane Foley, Rabobank’s head of currency strategy, said the latest monthly growth data was a “huge relief”.
“The recovery in manufacturing has been much stronger than expected and it’s very likely that that has had some spillover effects on retail as well. So that’s probably leading to consumption growth as well, which is probably a very positive thing,” he told CNBC’s “Squawk Box Europe” on Thursday.
Economists expect the UK economy to improve in 2026, especially as the Bank of England is likely to continue its rate-cutting path.
“Looking ahead, we expect a strong recovery in GDP in the first quarter of 2026,” Sanjay Raja, chief UK economist at Deutsche Bank, said in emailed comments this week.
“Survey data is already improving as the budget challenge subsides, and there are preliminary signs that the labor market may be stabilizing,” he said.
“We expect households to spend a bit more at the beginning of this year and investment to continue on an upward trend,” he added. Deutsche Bank expects UK GDP growth to be slightly lower this year than in 2025 (1.1%), while quarterly growth is expected to be 0.35% sequentially.
However, Mr. Raja cautioned that “there are further downside risks to our growth forecast given the vulnerabilities in the labor market.”
