BOE eyes rate cut as UK economy stalls
The latest GDP and manufacturing figures are dismal as Brexit uncertainties had a big knock on consumer and business spending
London — The UK economy has stalled, official data showed Monday, as Brexit and political uncertainty contributed to slashing manufacturing output, heaping pressure on the Bank of England (BoE) to cut interest rates.
GDP contracted 0.3% in November, the Office for National Statistics said in a statement, growing only 0.1% in the three months to the end of November.
Manufacturing meanwhile slumped 1.7% in November.
Speaking ahead of the data, a BoE policymaker, Gertjan Vlieghe, hinted at a potential vote in favour of a January cut to the BoE’s main interest rate, weighing on the pound on Monday.
It followed comments on Friday by fellow policymaker Silvana Tenreyro, who said she could support a rate cut from the current 0.75% level if the economy did not strengthen. And on Thursday, the bank’s outgoing governor Mark Carney said the monetary policy committee was looking at the merits of near-term stimulus.
As for the latest GDP data, “a poor performance in November was always on the cards given that the uncertainties facing the economy were at a peak with the general election looming and doubts over what would happen on the Brexit front after it had been delayed again from October 31”, noted Howard Archer, chief economic adviser to financial researchers EY ITEM Club.
“It is clear that businesses were cautious in their behaviour while it also appears that consumers were reluctant to spend,” said Archer.
UK Prime Minister Boris Johnson’s Conservatives convincingly won a general election in December that has broken the deadlock over the UK’s departure from the EU.
Britain’s parliament last week finally approved Brexit, ending years of arguments that toppled two UK governments.
“We expect the economy to get a lift in the early months of 2020 from a more settled domestic political environment following the Conservatives substantial win... and an easing of near-term Brexit uncertainties as the UK leaves the EU with Johnson’s deal on January 31,” said Archer.
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