GBP: UK economic growth surpasses forecasts in November – BBH

UK Economy Posts Stronger-Than-Expected Growth in November

In November, the UK economy outperformed forecasts, with real GDP expanding by 0.3% compared to the previous month. This improvement was largely fueled by robust performances in the services and manufacturing sectors, even as construction activity continued to decline, according to analysts at BBH FX.

Bank of England Maintains Flexibility for Further Rate Reductions

Economic data revealed that UK growth exceeded market expectations in November. Real GDP advanced by 0.3% month-over-month, surpassing the anticipated 0.1% increase and rebounding from a 0.1% contraction in October. The services sector grew by 0.3% after a 0.3% decrease the prior month, while production output climbed 1.1%, following a 1.3% rise in October, reflecting a notable boost in manufacturing. However, construction output continued to weigh on overall growth, falling by 1.3% after a 1.2% drop in October.

Despite this positive momentum, forward-looking indicators suggest that UK economic activity remains subdued, aligning with the Bank of England’s projection of 0.3% quarter-on-quarter growth for the fourth quarter. This environment provides the BOE with scope to further loosen monetary policy, which could continue to pressure the pound. The UK swaps market has already factored in 50 basis points of BOE rate cuts over the coming year, bringing the policy rate down to 3.25%.