People walk over London Bridge, in London, on Oct. 25.SUSANNAH IRELAND/Reuters
Britain’s economy might be in a recession, according to data that showed it shrank between July and September, shortly after finance minister Jeremy Hunt took the rare step of suggesting the Bank of England might cut interest rates to boost growth.
Gross domestic product (GDP) contracted by 0.1 per cent in the third quarter, the Office for National Statistics (ONS) said.
It had previously estimated that the economy was unchanged from the previous three months and economists polled by Reuters had mostly expected another unchanged reading.
Similarly, second-quarter GDP was now estimated to have been flat, a cut from a previous estimate of 0.2 per cent growth.
However, there were some more upbeat signs about the economy in separate data also published on Friday which showed retail sales in November jumped by much more than expected, increasing by 1.3 per cent from October, boosted by discount sales.
The boost to retail sales volumes reflected heavy discounting during the Black Friday sales promotions. Sales fell over the three months to November and were still below their pre-pandemic levels, the statistics office said.
Sterling rose against the dollar and the euro immediately after the data releases.
Finance minister Hunt – whose Conservative Party is lagging far behind the opposition Labour Party in opinion polls with an election expected next year – took the unusual step of commenting on the BoE’s interest rate decisions.
“There’s a reasonable chance that if we stick to the course we’re on, we’re able to bring down inflation, the Bank of England might decide they can start to reduce interest rates,” Hunt said in an interview with the Financial Times published late on Thursday.
The BoE has stressed that it is premature to talk about cutting interest rates although a recent slowdown in Britain’s high rate of inflation has helped to fuel bets in financial markets that Bank Rate could fall to as low as 3.75 per cent by the end of next year, from its current 15-year high of 5.25 per cent.
After Friday’s figures, Hunt issued a statement saying the outlook for the economy was not as bad as the numbers suggested. The ONS said the broader picture for the economy was one of little change over the last year.
Britain’s economy was now estimated to be 1.4 per cent bigger than immediately before the COVID pandemic struck in early 2020, the second weakest recovery in the Group of Seven after Germany.
Economists were split on whether the third-quarter contraction in the economy would prove to be the start of a recession as defined by two consecutive quarters of shrinkage.
Ashley Webb, at Capital Economics, said the data suggested a mild recession might have begun with the economy showing signs of struggling again in the fourth quarter and because much of the hit from higher borrowing costs was yet to filter through.
Samuel Tombs, at Pantheon Macroeconomics, predicted GDP would hold steady between October and December and households faced a better 2024 when inflation is due to slow further, the tax burden will be lightened and welfare benefits go up.
Friday’s data showed households had a bigger savings cushion in the third quarter with the savings ratio, measuring the income that households saved as a proportion of their total available disposable income, rising to 10.1 per cent from 9.5 per cent in the second quarter as incomes rose more quickly than spending.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
