Rate cut still on despite growth boost, say analysts – Daily Business

The UK economy grew by 0.3% in November, stronger than expectations, after car production rebounded and the services sector expanded.

Production grew by 1.1% in November, driven by increases to electricity and gas supplies, official figures from the Office for National Statistics show.

However, growth in the three months to November was a meagre 0.1%, admitted ONS director of economic statistics Liz McKeown.

Luke Bartholomew, deputy chief economist, at Aberdeen said: “After months of very sluggish activity, the November GDP report suggests there is still some life left in the UK economy.

“Of course, the monthly reports are very volatile, and the three month measure is still very weak at just 0.1% growth.

“But the final quarter of last year now looks like it ended in expansion. Looking forward, it is still not clear where the drivers of a sustainable pick-up in growth through 2026 come from. So we continue to expect Bank Rate to fall to 3% this year as long as inflation plays ball.”  

Kevin Brown, savings expert at Scottish Friendly, said: “After months of disappointment, November’s GDP figures offer a much needed and unexpected confidence boost.

“Given the headwinds facing businesses – from higher payroll taxes to growing geopolitical uncertainty – this recent data suggests that firms are starting to find their feet. Encouragingly, more up-to-date PMI data points to that momentum carrying into the end of the year, with manufacturing showing signs of a December rebound.

“That said, it’s important not to get carried away. While oil is well below where it was a year ago, the price has spiked in recent days following the unrest in Iran, one of the world’s largest oil producers. If the price continues to rise, it would lead to higher energy prices, which would hit manufacturers and derail their recent recover. This is something the Bank of England will be keeping a close eye on. 

“As things stand, we still expect an interest rate cut by March, with another in the second half of the year, though global events could yet change the picture.”

A Treasury spokesman said: “To make the economy work for working people, we are reversing years of underinvestment by protecting record infrastructure investment, driving through major planning reform, backing expansion at Heathrow and Gatwick, delivering Northern Powerhouse Rail and getting Sizewell C built.”