ALBAWABA – The UK economy shrunk in October as activity declined, according to the United Kingdom’s (UK) Office for National Statistics’ (ONS) data, released on Wednesday.
Gross domestic product (GDP) contracted 0.3 percent on sliding construction, manufacturing and services activity, the ONS said in a statement, reported by Agence France-Presse (AFP).
On the eve of the Bank of England's (BoE) UK interest rate decision, the ONS data reaffirms the impact of high interest rates on the UK economy, as the BoE is expected to pin rates ahead of the new year.
AFP reported that markets had speculated a contraction, but at a much milder level, at 0.1 percent.
Adding to the BoE’s worries, the UK economy was flat in the three months to October, the ONS also revealed.
British finance minister Jeremy Hunt cautioned that a string of BoE rate hikes, aimed at dampening inflation, had impacted activity.
The UK economy is suffering under high interest rates intended to bring inflation down - Shutterstock
"It is inevitable [that the] GDP will be subdued whilst interest rates are doing their job to bring down inflation," Chancellor of the Exchequer Hunt said in reaction to the data, as reported by AFP.
Economists polled by Reuters had expected no change in GDP in October. But official data showed this was the first time since July that the UK economy had shrunk on a monthly basis.
The Pound Sterling fell by about a third of a cent against the US dollar and was weaker against the euro too, Reuters reported, and the yield on 10-year British government bonds fell to its lowest since May.
Both AFP and Reuters reported that the central bank is widely expected to keep key UK interest rates at 5.25 percent on Thursday to further bring the still-high UK inflation rate down. UK inflation is proving sticky still, at 4.6 percent in October.
