The UK economy stagnates in the third quarter, but avoids the start of a recession

The British economy stagnated in the third quarter but at least managed to avoid the start of a recession, figures released by the Office for National Statistics showed on Friday.

The 0% change in gross domestic product in the third quarter compared with the previous three months was slightly better than economists in a Reuters poll expected a 0.1% decline, a result that many analysts said was likely to mark the beginning of a recession.

Paul Dales, chief economist at consultancy Capital Economics, said analysis of the data showed that GDP saw a marginal decline of 0.02%, although the figure was rounded to show no change.

“But the bottom line is that the economy is not weak enough to bring down core inflation and wage growth quickly,” Dills said.

“As such, we do not expect the Bank of England to be able to cut interest rates before the end of 2024, rather than mid-2024 as is widely expected.”

ING’s James Smith said the economy had been saved from contraction by net imports, which are generally volatile, while consumption and business investment fell.

Agency data is preliminary and subject to review.

Last week, the central bank said it expects zero economic growth next year – a difficult scenario for Prime Minister Rishi Sunak, who is expected to call a national election in 2024 – but has kept interest rates at their highest levels in recent years. It still faces an inflation rate more than three times its target of 2%.

The Bank of England, mindful of the economic pain caused by 14 consecutive interest rate hikes over nearly two years through August, had expected a stable reading for gross domestic product in the third quarter.