UK GDP to see October rise but tough November and December to follow

(Alliance News) - The UK economy is expected to have registered a monthly rise in October, though the reading will paint a "misleading impression", analysts at Pantheon Macroeconomics said.

The reading, penned for next week Monday, is likely to show a month-on-month gross domestic product hike of 0.5% for October.

"The month-to-month growth rate will be supported by the return of the number of working days to their seasonal norm, following the extra bank holiday for the Queen's funeral in September," Pantheon analysts explained.

"We look for a 0.5% month-to-month increase in GDP, which would reverse nearly all of September's 0.6% decline, but still anticipate a 0.3% quarter-on-quarter drop in Q4 as a whole. Business surveys unambiguously suggest that GDP is on a downward trend."

The UK economy shrank 0.2% in the third quarter, so a 0.3% decline in the fourth quarter would constitute a recession.

October's GDP reading will be followed by less-than-stellar readings in November and December, Pantheon analysts predict.

Pantheon added: "Looking ahead, we expect GDP to fall back in November and December, despite the boost to disposable incomes last month from the reversal of April's NI hike and the payment of the second cost of living grant to low-income households. November's PMI data suggest that prices still are rising more quickly than wages and businesses are hiring much more cautiously than earlier this year.

"The sharp rise in mortgage rates likely also is starting to slow housing-sensitive parts of the economy, and to spur many households to manage their finances more cautiously."

By Eric Cunha, Alliance News news editor

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