United Kingdom: The economy contracts sharply in November
According to monthly GDP data released by the Office for National Statistics (ONS), economic activity shrank 0.3% in November over the previous month in seasonally-adjusted terms (October: +0.1% month-on-month, previously reported: +0.0% mom), undershooting market expectations of a flat reading. In the three months to November, the economy expanded a mere 0.1%, down from October’s revised 0.2% expansion (previously reported: +0.0%).
November’s weak showing was driven by declines in manufacturing and services, likely impacted in part by hefty political uncertainty in the run-up to the December elections.
Looking forward, our panelists see the economy picking up some steam moving through 2020, thanks to a looser fiscal stance and some reduction in political noise following the decisive Conservative election victory. However, Brexit-related uncertainty will likely stay high as the UK and EU negotiate a free trade agreement, keeping a lid on any economic uptick.
As James Smith, an economist at ING, comments: “If the transition period is not extended by June, then it will be a very uncertain race to get a free-trade agreement ready by the end of 2020. Failure would mean an abrupt exit from the single market and customs union for British firms, and this is the key reason why we aren’t expecting a big rise in UK investment this year.”