UK GDP Contracts 0.1% in October Amid Persistent Economic Challenges

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The UK economy experienced another contraction in October, with economic activity in the world's sixth-largest economy remaining sluggish. This raises the likelihood of additional interest rate cuts by the Bank of England in 2025.

According to data from the Office for National Statistics (ONS), the UK's gross domestic product (GDP) shrank by 0.1% in October, matching the previous month's decline. On an annual basis, growth stood at 1.3%, falling short of expectations. Analysts had anticipated a 0.1% monthly growth and a 1.6% yearly increase.

The Bank of England reduced its base interest rate by 25 basis points last month, bringing it down from 5% to 4.75%. This continued its recent shift toward lowering borrowing costs after rates peaked at a 16-year high. Given this latest economic performance, another rate cut is anticipated in the coming weeks. However, the Bank must also consider the impact of the first budget introduced by the new Labour government, which includes significant borrowing increases and tax hikes.

In the broader context, the UK economy grew by just 0.1% in the third quarter of 2024 compared to the previous quarter, down from 0.5% growth in the second quarter. The International Monetary Fund (IMF) projects a 1.1% growth rate for the UK in 2024, a slower pace than in previous years, placing it mid-range among major global economies.

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