Tag: ONS

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UK economy unexpectedly shrank by 0.1% in January 2025

UK economy shrinks

The UK economy faced an unexpected contraction of 0.1% in January, marking a surprising downturn following a 0.4% growth in December 2024

This decline, reported by the Office for National Statistics (ONS), has raised concerns about the nation’s economic trajectory, particularly as the government prioritizes boosting growth.

The contraction was primarily attributed to a slowdown in manufacturing, alongside weak performances in oil and gas extraction and construction.

The ONS noted that while the economy shrank in January 2025, the broader three-month period still showed modest growth of 0.2%. But never-the-less, it remains one of weak growth.

Interestingly, the services sector provided a glimmer of hope, driven by robust retail activity, especially in food stores, as consumers opted to eat and drink at home more frequently. This sector’s resilience partially offset the declines in other areas.

The timing of this economic dip is particularly significant, as it precedes the Chancellor’s Spring Statement, where even more government spending cuts are expected to be outlined.

Chancellor Rachel Reeves acknowledged the challenges and reportedly commented that the global economic landscape has shifted, and the UK is feeling the repercussions. She reiterated the government’s commitment to accelerating efforts to stimulate growth and reform public services.

However, the unexpected contraction has sparked criticism from opposition parties, who have labeled the government’s policies as ineffective in fostering sustainable economic growth.

The Shadow Chancellor reportedly described the government as a ‘growth killer,’ citing high taxes and restrictive employment legislation as barriers to business confidence and therefore growth.

As the UK navigates these economic headwinds, the focus will remain on the Chancellor’s upcoming measures and their potential to steer the economy back on track.

The January figures serve as a stark reminder of the fragile state of the UK economy and the challenges that lie ahead.

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UK Government finances in surplus but…

UK finances

The UK government has announced a significant budget surplus for January 2025, marking a notable achievement in its fiscal management

The surplus, which is the difference between what the government spends and the tax it takes in, amounted to £15.4 billion. This figure represents the highest level for the month of January since records began over three decades ago.

However, despite this impressive surplus, the figure fell short of the Office for Budget Responsibility’s (OBR) forecast of £20.5 billion. The shortfall has increased pressure on Chancellor Rachel Reeves to meet her self-imposed fiscal rules.

The OBR, which monitors the government’s spending plans and performance, will release its latest outlook for the UK economy and public finances on 26 March 2025.

The surplus was driven by a surge in tax receipts, particularly from self-assessed taxes, which are typically higher in January compared to other months. However, the lower-than-expected tax receipts suggest underlying weaknesses in the UK economy.

The Office for National Statistics (ONS) reported that borrowing in the financial year to January 2025 was £118.2 billion, which is £11.6 billion more than at the same point last year.

The government now faces the challenge of balancing its fiscal rules with the need to support economic growth. Weak economic growth and higher borrowing costs have reduced the headroom available to the Chancellor, making it more difficult to meet her fiscal targets.

Economists have suggested that Reeves may need to consider raising taxes or cutting public spending to stay within her fiscal rules.

As the UK economy continues to navigate these challenges, the government’s ability to manage its finances effectively will be crucial in maintaining credibility with financial markets and ensuring long-term economic stability.

The upcoming Spring Forecast will be a critical moment for the UK Chancellor to outline her plans and address the fiscal challenges ahead

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UK inflation higher-than-expected at 3% in January 2025

UK Inflation up

UK inflation rose sharply in January 2025 after airfares failed to fall by as much as usual and private school fees jumped.

The higher-than-expected inflation increase to 3% in the year to January 2025, from 2.5% in December 2024, means that consumer prices rose at the fastest rate for 10 months.

Why?

The U.K.’s inflation rate rose sharply to 3% in January, coming in above analyst expectations of a 2.8% reading, according to data released by the Office for National Statistics (ONS) on Wednesday 19th February 2025.

Core inflation, which excludes more volatile items such as energy, food, alcohol and tobacco prices, rose by 3.7% in the 12 months to January 2025, which was up from 3.2% in the previous month.

The ONS reported Wednesday 19th February 2025 that the largest upward contribution to the monthly change in the CPI came from transport and food and non-alcoholic beverages.

Interest rate reductions will likely pause on this news.

I wonder what spin the UK chancellor add.

Not good!

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EEK! Only 0.1% growth for the UK

Tepid UK GDP

The U.K. economy grew by just 0.1% in the fourth quarter according to a preliminary estimate from the U.K.’s Office for National Statistics (ONS) released Thursday 13th February 2025.

Economists had expected the country’s GDP to contract by 0.1% over the period.

The services and construction sectors contributed to the better-than-expected performance in the economy, up 0.2% and 0.5% respectively, but production fell by 0.8%, according to the ONS.

Sluggish growth

The UK economy recorded zero growth in the third quarter, accompanied by lacklustre monthly GDP. There was a 0.1% contraction in October 2024 followed by a 0.1% expansion in November 2024.

On Thursday 13th February 2025, the ONS that growth had picked up in December, with an estimated 0.4% month-on-month expansion attributed to growth in and production.

Sluggish and a recent decline in inflation prompted the Bank of England to implement its interest rate cut of the year last week, reducing the benchmark rate to 4.5%.

The central bank indicated that additional rate cuts are anticipated as inflationary pressures diminish. However, it noted that higher energy costs and regulated price changes are projected to increase headline inflation to 3.7% in the third quarter of 2025.

Pressure

The expectation is that UK underlying inflationary pressures will continue to decline. The Bank of England expects the inflation rate to return to its 2% target by 2027.

The bank also halved the U.K.’s economic growth forecast from 1.5% to 0.75% this year.

Poor economic performance will add additional pressure on U.K. Chancellor Rachel Reeves, whose fiscal plans have been criticised for increasing the tax burden on businesses.

Critics say the plans, which increase the amount that employers pay out in National Insurance (NI) contributions as well as a hike to the national minimum wage, could harm investment, jobs and growth. This appears to be coming to fruition.

Chancellor Reeves defended her ‘dire’ Autumn Budget reportedly saying the £40 billion of tax rises were needed to fund public spending and that she is prioritising economic growth.

A poor start – 0.1% is an anaemic growth percentage!

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UK inflation rate rises to 2.6% to hit highest level since March 2024

The UK inflation rate has gone up for the second month in a row, rising at the fastest pace since March 2024. The UK inflation rate rose to 2.6% in the year to November 2024, according to official figures.

However, the rise was predicted by economists and was apparently within the range of the expected increase anticipated.

Fuel and clothing were significant contributors to the increase. Additionally, rising ticket prices for concerts and theatrical performances played a role according to data from the Office for National Statistics (ONS).

The Bank of England raises interest rates to maintain inflation at its target of %. The next rate decision is on Thursday 19th December 2024 and economists anticipate that rates will remain at 4.75%.

Prices for food and non-alcoholic drinks, alcohol and tobacco, and footwear all rose at a faster pace last month.

A wider measure of inflation showed housing and household services costs, including rent, rose by 3.5%.

UK inflation 2016 – 2024

UK inflation 2016 – 2024
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UK economy shrinks unexpectedly for second month in a row contracting 0.1% in October 2024

The U.K. economy contracted unexpectedly in October 2024, according to data from the Office for National Statistics (ONS).

Gross Domestic Product (GDP) fell by an estimated 0.1% on a monthly basis, the ONS said Friday 13th December 2024, attributing the downturn to a decline in production output. 

It marked the second consecutive economic downturn, following a 0.1% GDP decline in September 2024. Sterling declined on the back of these disappointing figures, trading 0.3% lower against the U.S. dollar in early trade.

However, ‘real’ GDP is estimated to have grown 0.1% in the three months to October 2024, the ONS said, compared to the previous three months ending in July 2024.

In a statement on Friday 13th December 2024, U.K. Finance Minister Rachel Reeves reportedly conceded that the October figures were ‘disappointing,’ but defended the government’s economic strategies. I expect the chancellor would have been quick to own the success had the GDP improved – especially after the ‘for growth’ budget.

The economy has grown just once over the past five months and is 0.1% lower than before Labour won the election. That may suggest it’s not just the Budget that is holding the economy back. Instead, the drag from higher interest rates may be lasting longer than was calculated.

Either way, be it budget or inflation pressure – the UK economy isn’t growing.

UK GDP January 2022 – October 2024

Note: preliminary ONS figures may be revised in future assessments

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UK growth slows – it’s the ‘budget’ stupid!

Low UK growth figures

The UK economy expanded by just 0.1% from July to September 2024, as announced in the most recent official data release.

The growth was less than anticipated, and the Office for National Statistics (ONS) reported that most sectors experienced subdued activity over the quarter.

Labour, having prioritised economic growth upon assuming power, found Chancellor Rachel Reeves expressing dissatisfaction with these figures, which represent the initial three months of the new administration.

Several economists have attributed the uncertainty surrounding the contents of October’s Budget as a factor impeding growth.

This impact was notably pronounced in September, when the economy saw a contraction of 0.1%.

Moreover, the government is contending with criticism from certain businesses that are opposed to the tax increases introduced in the Budget.

Whichever way you look at these figures; they’re utterly dire.

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UK inflation in surprise fall to 1.7%

UK Inflation down below target

UK inflation fell unexpectedly to 1.7% in the year to September 2024, the lowest rate in three-and-a-half years

This indicates that inflation, which is the rate at which prices increase over time, is currently below the Bank of England’s target of 2%, potentially leading to further reductions in interest rates next month.

The Office for National Statistics (ONS) reported that petrol and diesel prices saw a notable decrease, falling by 10.4% in September 2024compared to the same month the previous year.

Additionally, the cost of fares for domestic, European, and long-haul flights contributed to the lower inflation rate. While fares typically decrease after the summer peak, this year they have reduced more than usual.

UK interest rate at 1.7% below the Bank of England target of 2%

UK interest rate at 1.7% below the Bank of England target of 2%

With inflation dropping below economists’ expectations, the markets are anticipating a cut in interest rates at the Bank of England’s upcoming meeting in November 2024. The present rate stands at 5%, and a reduction of 0.25% is now deemed highly probable.

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UK economic growth revised down to 0.5%

UK growth lower

The UK’s economic growth for the period between April and June 2024 was lower than initially estimated, as reported by the ONS

The Gross Domestic Product (GDP), which quantifies the economic activity of companies, governments, and individuals within a country, increased by 0.5%, a revision from the preliminary figure of 0.6%.

Both the manufacturing and construction sectors experienced greater declines than initially calculated.

This information comes to light as the Labour government, which prioritises economic growth, gears up to present its first Budget at the end of October 2024.

The Office for National Statistics (ONS), the publisher of these statistics, noted a significant 3.1% decrease in the production of transport and related equipment during this quarter, following a sustained period of expansion, a stark contrast to the initially estimated 0.7% decrease.

The ONS indicated that this downturn could be attributed to factories scaling back production in anticipation of the transition towards electric vehicle manufacturing.

Additionally, the construction sector saw a downturn, continuing the trend of decreased new home construction.

However, the ONS said that the outlook was improving.

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UK economy flatlines for second month in a row

UK economic health

The UK’s economy did not experience growth in July 2024, continuing the stagnation from June 2024, as indicated by official data

Analysts had anticipated a modest growth of 0.2% for July. However, the Gross Domestic Product (GDP) fell short of the expectations set by economists surveyed by Reuters, who had predicted a 0.2% increase. Additionally, the country experienced no GDP growth in June 2024.

In July 2024, Britain’s predominant services sector experienced a slight increase of 0.1%, while production and construction outputs declined by 0.8% and 0.4%, respectively.

The UK’s economic growth rose by 0.5% in the three months leading up to July 2024, which was marginally below the expectations of economists and the 0.6% growth seen in the second quarter ending in June.

The services sector received a boost from a summer filled with sports events, including the Euros and the Olympics, despite the downturn in production and construction outputs.

The absence of growth for another month poses a significant challenge for the new Labour government, which has prioritised economic stimulation.

Despite no growth in July 2024, the Office for National Statistics (ONS) noted that the services sector showed strength over the last three months as a whole. Growth was primarily driven by computer programmers and the health sector, which bounced back from June’s strike action.

However, there was a decline in output from the advertising, architecture, and engineering sectors, according to the ONS. Car and machinery firms experienced a particularly challenging month.

While the ONS tracks gross domestic product (GDP) monthly, greater emphasis is placed on the three-month trend. Monthly figures, being preliminary estimates, are often subject to minor revisions as more data becomes available.

UK economy flatlines in July 2024

UK economy flatlines in July 2024 (Graph and Data ONS)
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UK inflation rate climbs to 2.2%

UK inflation

The UK’s inflation rate has risen for the first time this year, official ONS figures show.

This indicates that overall prices increased by 2.2% in the year leading up to July, a rise from 2% in June, surpassing the Bank of England’s target.

The anticipated increase is primarily attributed to the less significant drop in gas and electricity prices compared to the previous year.

The Bank of England reportedly anticipates a further increase in inflation this year before it declines again.

The core inflation rate, which is the Consumer Price Index (CPI) excluding food, energy, alcohol, and tobacco prices, was reported at 3.3% in July, a slight decrease from 3.5% in June, according to the statistics office.

Additionally, service inflation, which the Bank of England (BoE) monitors closely, decreased to 5.2% in July from 5.7% the previous month, yet still remains elevated.

These inflation statistics follow the release of data on Tuesday 13th July 2024, which revealed that the average wage growth excluding bonuses was 5.4% from April to June year-on-year, the lowest in two years.

Concurrently, the unemployment rate dropped to 4.2% during this period, down from 4.4% between March and May 2024.

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UK unemployment falls slightly and pay growth slows

UK employment data

Official figures indicate a slight decrease in the UK’s unemployment rate, which was 4.2% in the three months to the end of June 2024, a drop from the previous quarter’s 4.4%.

In contrast, UK wage growth has decelerated, with an annual increase of 5.4%, marking the lowest rate in approximately two years.

Not all positive

The Office for National Statistics (ONS) has acknowledged some positive developments, yet it also noted indications of a ‘cooling’ job market, evidenced by an increase in job vacancies, a rise in redundancies, and a persistently high number of individuals not actively seeking employment.

This trend emerges as businesses are grappling with escalating operational costs and potentially reducing their recruitment efforts.

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UK inflation holds at Bank of England’s 2% target but above projections

UK inflation

U.K. inflation matched the Bank of England’s target of 2% in June 2024, as calculated by data from the Official for National Statistics on Wednesday 17th July 2024.

The main figure was slightly higher than the 1.9% forecast by analysts surveyed by Reuters, aligning with May’s 2% figure.

Following the announcement, the value of Sterling increased modestly, reaching $1.2977 at 7:21 a.m. British Summer Time.

The Bank of England (BoE) closely monitors services inflation due to its significant role in the U.K. economy and as an indicator of domestic price increases, which remained at 5.7% in June. Service inflation remains a stubborn issue and a problem still for the BoE.

The core inflation rate, which excludes energy, food, alcohol, and tobacco, stood at 3.5%, consistent with the rate seen in May 2024.

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Much Ado About Nothing – UK GDP and the ‘r’ word

UK recession is over... already!

The U.K. economy has recovered from its ‘technical’ recession, with the gross domestic product (GDP) increasing by 0.6% in the first quarter, surpassing expectations.

Official figures released on Friday revealed this growth, which exceeded the 0.4% predicted by economists surveyed by Reuters for the previous quarter.

In the latter half of 2023, the U.K. experienced a mild recession due to ongoing inflationary pressures impacting economic performance.

Technically there is no official definition of a recession – however, two straight quarters of negative growth is widely accepted as a technical recession.

The production sector in the U.K. saw an expansion of 0.8% from January to March, whereas the construction sector experienced a decline of 0.9%. The economy witnessed a growth of 0.4% in March on a monthly basis, succeeding a 0.2% increase in February.

According to the Office for National Statistics, the services sector, which is vital to the U.K. economy, grew for the first time since the first quarter of 2023. This growth of 0.7% was primarily propelled by the transport services industry, marking its most significant quarterly growth since 2020.

Much Ado About Nothing

‘Much Ado About Nothing’ is a comedy by William Shakespeare, written around 1598 – 1599. The play is included in the First Folio, published in 1623, and is set in the Italian city of Messina.

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UK inflation eases to 3.2% but down less than expected

UK inflation data March 2024

Inflation in the U.K. eased to 3.2% from 3.4% in March, the Office for National Statistics said on Wednesday 17th April 2024.

But a higher-than-expected reading creates more concern as investors push back bets on the timing of the first Bank of England (BoE) rate cut.

Economists expected 3.1% as inflation has been falling gradually since it peaked at 11.1% in late 2022.

Food prices provided the biggest downward drag on the headline rate, the ONS said, while motor fuels pushed it higher.

The core inflation rate, excluding energy, food, alcohol, and tobacco, was reported at 4.2%, slightly above the forecasted 4.1%. Services inflation, closely monitored by U.K. monetary policymakers, decreased from 6.1% to 6%, still surpassing the expectations of economists and the Bank of England (BoE).

The March core inflation figure, remaining above 4%, is expected to fuel speculation that inflation is more persistent than recent projections indicated, potentially delaying the anticipated timing of initial interest rate reductions.

UK inflation 3.2% March 2024

UK inflation 3.2% March 2024
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Latest UK pay growth and unemployment data

UK jobs

The latest figures on UK pay growth and unemployment present a complex picture of the country’s labour market.

The unemployment rate has seen a slight uptick to 4.2%, a rise from the previous 3.9%. This increase, which is more than anticipated, suggests a softening in the labour market.

Conversely, wage growth appears to be resilient in the face of rising unemployment. Although core wage growth has decelerated, it remains in the region of 6%. This could indicate that employers are maintaining competitive wages to attract and retain skilled workers, even amidst a slowing labour market.

Employment dipped according to the ONS

The ONS said employment rate dipped to 74.5% between December and February and the percentage of 16 to 64 year-olds defined as economically inactive rose from 21.8% to 22.2%, which equates to 9.4 million people.

In February 2024, the average weekly earnings were estimated at £677 for total earnings and £633 for regular earnings. This equates to an annual growth in regular earnings (excluding bonuses) of 6.0%, and annual growth in employees’ average total earnings (including bonuses) of 5.6%.

Adjusting for inflation using CPIH

However, when adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH), the real terms growth for regular pay was 1.9%, and for total pay was 1.6%. This implies that while nominal wages are increasing, the real purchasing power of these wages may not be keeping up with inflation.

Bank of England

The Bank of England will likely approach this data with caution. The combination of increasing unemployment and slowing wage growth could be indicative of a weakening economy, potentially prompting the Bank to contemplate rate cuts.

The response of the Bank of England to these trends will be pivotal in the forthcoming months.

Summary

In summary, the UK labour market is exhibiting signs of cooling with an increase in unemployment and a slowdown in wage growth. However, wages continue to grow at a relatively high rate. The real impact on workers will hinge on how these wage increases stack up against inflation.

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UK recession confirmed but early signs of green shoots of recovery have been seen

UK recovery

The Office for National Statistics (ONS) has released updated UK GDP figures, confirming that the UK entered a technical recession in the last six months of the previous year.

The new data shows the economy contracted by 0.1% in the three months from June to August 2023, with a further decline of 0.3% in the subsequent financial quarter from September to December 2023. The overall economy grew by 0.1% throughout 2023.

However, early signs suggest that the UK began to recover in January 2024, with initial data indicating some growth, and surveys suggesting this trend may have gained momentum into February and March 2024.

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UK inflation down to 3.4% in February 2024

UK inflation

In February 2024, inflation decreased to 3.4%, a decline from January’s 4%, moving closer to the Bank of England’s self-imposed target of 2%


This reduction signifies that the cost of living is increasing at its least rapid rate since September 2021, when it was recorded at 3.1%.

Since reaching a peak of 11.1% in October 2022, the highest in 40 years, inflation has been on a steady decline. In the big inflation picture, that’s a pretty good result.

It has only taken around 16 months to move the rate from 11.1% (a 40-year high) down to just 1.4% above the BoE’s target of 2%.

The primary factor contributing to this decrease, as reported by the Office for National Statistics (ONS), is the deceleration of food price inflation.

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UK posts record budget surplus in January 2024

Red brief case

The U.K. logged a record £16.7 billion net budget surplus in January 2024, according to official figures released on Wednesday 21st February 2024

The Office for National Statistics noted that the country’s public finances usually run a surplus in January, unlike during other months, as receipts from annual self-assessment tax returns come in.

Combined self-assessment income and capital gains tax receipts totaled £33 billion in January, the ONS noted, down £1.8 billion from the same period of last year.

Total government tax receipts came in at a record £90.8 billion, up £2.9 billion compared to January 2023.

Government borrowing during the financial year spanning to the end of January 2024 was £96.6 billion, £3.1 billion lower than over the same 10-month period a year ago and £9.2 billion lower than the £105.8 billion previously forecast by the independent Office for Budget Responsibility.

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Tax cuts are coming, it must be election time again

Tax man

Spinning the benefits of a tax cut scenario as Chancellor Jeremy Hunt hints at further tax cuts

The Chancellor, Jeremy Hunt, has given strong hints that he wants to cut taxes in the spring Budget.

Mr Hunt reportedly said that countries with lower taxes have more ‘dynamic, faster growing economies.‘ Didn’t Liz Truss say something like that too? But of course, she didn’t ‘cost it out’ in her mini budget apparently – but she also wanted lower taxes for growth none-the-less.

Autumn statement

In the Autumn Statement, the chancellor reduced national insurance for workers by 2% and announced tax relief for businesses. If inflation falls, followed by lower interest rates, Mr Hunt may consider he has scope for further tax cuts.

At the World Economic Forum, in Davos, Switzerland – he was also reported to have said that the: ‘direction of travel’ indicates that economies growing faster than the UK, in North America and Asia tend to have lower taxes. ‘I believe fundamentally that low-tax economies are more dynamic, more competitive and generate more money for public services like the NHS,’ he reportedly said.

It is widely expected that the chancellor will focus on income tax in the upcoming Budget due on 6th March 2024

Lower than expected government borrowing last month has increased the possibility of tax cuts in the Budget, analysts say.

UK Borrowing fell to £7.8bn in December 2023, the Office for National Statistics (ONS) indicated. Interest payments dropped sharply due to a faster than expected decline in inflation. Analysts said the latest figures could give the chancellor more wiggle room for tax cuts.

December’s borrowing figure was £8.4bn less than a year earlier, and the lowest figure for the month since 2019.

Interest payments on government debt fell to £4bn, down by £14.1bn from December 2022.

Tax man
‘I hope you have some juicy tax cuts for me?’
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UK retail sales fall. Sharpest rate since Covid lockdowns

UK retail

Retail sales volumes fell by 3.2% in December in the sharpest drop since the UK was in a Covid lockdown says the ONS.

Official figures revealed a sharp decline in demand for goods, but surprisingly food sales also declined in the run-up to Christmas.

The Office for National Statistics (ONS) said it appeared people did their shopping earlier in November, taking advantage of Black Friday sales.

The latest ONS data indicates that sales tumbled at the fastest rate since January 2021.

Monthly change in UK retail sales 2019 – 2023

UK retail sales fall at sharpest rate since Covid lockdowns
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UK economy growth forecasts cut for next two years

UK economy growth

The UK economy will grow much more slowly than expected in the next two years as inflation takes longer to fall, the Office for Budget Responsibility (OBR) says.

Are we locked in a never-ending austerity cycle?

Living standards are also not expected to return to pre-pandemic levels until 2027-28, the Office for Budget Responsibility (OBR) said. It comes as the chancellor announced tax cuts and a rise in benefits in his 2023 Autumn Statement.

The OBR publishes two sets of economic forecasts a year, which are used to independently predict or guess what may happen to government finances. These are based on its best guess calculations about and are subject to ‘change’.

It’s just a forecast – so should we take any notice?

According to the OBR, the UK will grow by 0.6% in 2023 – much better than previous predications last autumn, when it calculated the economy would fall into recession and shrink.

However, it slashed its growth outlook to 0.7% in 2024 and 1.4% in 2025 – down from a previous forecast of 1.8% and 2.5%.

The OBR warned that inflation – currently 4.6% – will only fall to 2.8% by the end of 2024, before reaching the Bank of England’s 2% target in 2025. Previously it forecast inflation would easily beat the target next year.

OBR & ONS data set

These gloomy predictions put the Government on a collision course with the Bank of England and Britain’s budget watchdog as they clash over whether or not the UK economy is on the up.

The Governor of the Bank warned the UK was facing years of low growth, while the Office for Budget Responsibility (OBR) said the Chancellor’s ‘vague’ plans to cut spending put the public finances at risk.

Let’s re-visit these predictions this time next year and see how close or how far off the mark they were.

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Retail trouble – UK sales hit lowest level since 2021 lockdowns

UK retail spending slows in October 2023

Shoppers bought less food and fuel in October 2023 as they were hit by rising living costs and poor weather, according to ONS data.

The volume of products sold last month fell by 0.3% to the lowest level since February 2021 when large parts of the UK were in Covid lockdowns. Retail sales had been expected to grow in October 2023.

The Office for National Statistics (ONS) said fuel purchases may have been ‘affected by increasing prices’.

Demand for other goods was also lower, the ONS reported.

The CNBC/NRF Retail Monitor, which tracks card transactions, also reported a drop in consumer spending in October 2023, with retail sales, excluding autos and petrol/diesel, falling by 0.08%, and core retail, which also removes restaurants, declining by 0.03%. 

The report suggested that the consumer took a spending break ahead of the holiday season, amid rising inflation, supply chain disruptions, and labour shortages.

UK inflation presented a bigger drop in October 2023 than expected – this will likely drive higher retail spending through the holiday period.

Higher pay and lower inflation will provide a lift through the Christmas 2023 holidays.

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UK pay outstrips inflation by highest amount for two years

UK pay up

Pay growth has outstripped inflation by the most since 2021, in a further sign that the pressure on living costs may be starting to ease.

Regular pay rose at an annual rate of 7.7% between July and September 2023, official figures show; higher than average inflation over the same three months.

But job vacancies fell for the 16th month in row, in a worrying sign that the jobs market is weakening. Between August and October 2023, the estimated number of vacancies in the UK fell to 957000, down 58000 – although the Office for National Statistics (ONS) said the total remains well above pre-pandemic levels.

Data Source: Office for National Statistics Data

UK pay outstrips inflation by highest amount for two years

The UK’s unemployment rate was largely unchanged between July to September 2023 at 4.2%, according to ONS data.

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UK inflation sticks at 6.7%

Chart

The UK rate of inflation is stuck at 6.7% for September 2023, the same rate as August 2023, according to the Office for National Statistics (ONS).

It means prices are still rising at the same rate as the previous month.

Petrol and diesel costs kept inflation up, the Office for National Statistics (ONS) says, but food and non-alcoholic drink prices fell for the first time since September 2021.

Food inflation falls the most

Milk, cheese and eggs are among the products that went down the most; the price of household appliances and airfares fell to.

In response to the latest figures, Chancellor Jeremy Hunt said, ‘inflation rarely falls in a straight line’. He pledged to stick to the government’s promise to get the main rate of inflation down to 5% by the end of the year.

Thank you for that enlightening comment, Mr Hunt. May I remind you that even if you hit the target the government set of 5% by the end of the year; inflation will still be a whopping 3% above the Bank of England (BoE) original target!

Targets! Targets! Targets!

Thank you for that enlightening comment, Mr Hunt. May I remind you that even if you hit the target the government set of 5% by the end of the year; inflation will still be a whopping 3% above the Bank of England (BoE) original target!

Come on – get your act together! You really should have prepared batter and seen this coming.

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UK GDP grew in August 2023

GDP

U.K. Gross Domestic Product (GDP) grew by 0.2% in August, the Office for National Statistics (ONS) reported Thursday 12th October 2023, slightly recovering from a downwardly revised 0.6% contraction in July 2023.

Services output was the main contributor to growth in August 2023, adding 0.4% on the month to offset a fall in production output of 0.7% and a decline in construction output by 0.5%.

This data shows early signs of a cooldown in the labour market and thus, lower inflation further down the economic road.

Bank outlook

The data and outlook for the Bank of England (BoE) suggests that Bank rate increases do not have much upside from here and will most likely remain at current levels, but for a longer period.

The UK economy returning to growth in August 2023 has re-kindled expectations that interest rates will be left unchanged again in Novemeber 2023.

The economy grew marginally by 0.2% in August following a sharp fall in July 2023.