Financial News: UK Economy Contracts Unexpectedly On Weaker Production

UK Economy Contracts Unexpectedly On Weaker Production

(RTTNews) - The UK economy logged an unexpected contraction at the start of the year on a sharp fall in production, official data revealed on Friday.

Gross domestic product shrank 0.1 percent on a monthly basis in January, following a growth of 0.4 percent in December, the Office for National Statistics reported. GDP was expected to grow 0.1 percent. The largest contributor to the fall was industrial production, which fell 0.9 percent reversing a 0.5 percent gain in December. A similar sharp fall was last reported in April 2024.

Manufacturing output slid 1.1 percent, in contrast to the 0.7 percent increase in the previous month. At the same time, construction output was down 0.2 percent.

Partially offsetting these falls, services output edged up 0.1 percent. But this was weaker than the 0.4 percent expansion seen in December.

In the three months to January, real GDP moved up 0.2 percent from the three months to October. Compared to last year, GDP growth was 1.2 percent.

On a yearly basis, GDP grew 1.0 percent in January, weaker than the forecast of 1.2 percent. Capital Economics economist Paul Dales said the monthly fall in real GDP highlights the weakness of the economy before the full effects of the rise in business taxes and the uncertain global backdrop is felt.

Disappointing GDP data came ahead of the Chancellor's Spring Statement, which is due on March 26. The Office for Budget Responsibility will release the government spending plans alongside the Spring Statement.

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