What’s Going On Here?Data out on Monday showed the British economy bounced back in October. What Does This Mean?Britain’s economy was unsteady on its feet when September began, and the double-blow of the late Queen’s funeral and a period of national mourning left the country totally out for the count. But the economy returned to growth in October, with consumer-facing services like hospitality springing back after two months on the slide. And as the weather cooled, some Brits helped the health sector by lapping up more vaccinations and Covid tests, while others buoyed up travel and headed for faraway hills. In fact, there was good news across the board, with output across services, manufacturing, and construction all improving. That meant the economy grew 0.5% from September to October, faster than the 0.4% economists were expecting. Why Should I Care?Zooming in: Three strikes, you’re out.
Still, compare the three months through October to the previous three-month period, and you’ll find that the economy actually shrank 0.3%. And the situation might be about to get even worse: after all, inflation’s still emptying households’ coffers, and healthcare, rail, and postal workers are all set to strike this month – meaning Britain’s poised for industrial disruption on a scale it hasn’t seen since the '80s. No wonder some experts think the economy’s destined to shrink this quarter.
The bigger picture: Hikes will hurt.
That dire outlook could make things even harder for the Bank of England, which'll be adding another rate hike to its ongoing anti-inflation crusade later this week. After all, it predicted last month that even without hikes, the economy will shrink in five of the next six quarters, until the end of 2023. So while investors generally think the central bank will steer a milder course and announce a hike of 0.5 percentage points this time around, the country’s probably in for a bruising whatever happens. | 