The revised data released by the Office for National Statistics (ONS) on December 23 shows that the UK economy did not achieve growth in the three months up to September.

Previously, the preliminary estimate released by ONS last month indicated that the UK's GDP grew by 0.1% in the third quarter. However, the final data released on December 23 shows that the quarterly GDP growth for the third quarter is 0%.

As of now, the trading price of the British Pound against the US Dollar on December 23, Monday, is approximately 1.2570.

This set of data released by ONS strikes another blow to the UK economy, following a series of weak data that undermined market confidence and called into question the fiscal strategy of the newly elected Labour government.

Earlier this month, data from ONS showed that the UK economy unexpectedly contracted by 0.1% in October, marking the second consecutive month of GDP decline following a 0.1% drop in September.

Future Outlook

Paul Dales, chief UK economist at Capital Economics, stated that he expects the UK economy to stagnate in the final quarter of 2024 as well, but his outlook is not entirely pessimistic.

In the report, Dales stated: "Overall, these data indicate that after a strong economic performance in the first half of the year, the economy has stagnated in the second half due to the continued impact of higher interest rates, weak overseas demand, and concerns over budget policy."

He added: "We speculate that the economy in 2025 will be better than in 2024. However, the latest data indicate that as this year draws to a close, the momentum for economic growth remains weak."

Rising inflation and interest rate policy.

Meanwhile, inflation in the United Kingdom seems to be rising again. The ONS stated last week that the United Kingdom's inflation rate rose to 2.6% in November, an increase for two consecutive months.

The Bank of England subsequently (on December 19) kept its benchmark interest rate unchanged at 4.75%. Although markets previously expected that the Monetary Policy Committee (MPC) would not adjust interest rates at the December 19 meeting, it was surprising that three committee members voted in favor of a rate cut (Reuters had previously expected only one member to support a rate cut).

Although Bank of England Governor Andrew Bailey previously stated that there could be four rate cuts next year, traders have differing views on when a rate cut might occur. Data from the London Stock Exchange Group (LSEG) shows that the market expects the Bank of England to keep interest rates unchanged at the MPC meeting in February next year, but most traders expect the Bank of England to cut rates by 25 basis points in March next year.

The fiscal budget of the Labour government has sparked controversy.

At the end of October this year, UK Chancellor of the Exchequer Rachel Reeves announced the first budget of the Labour government since taking over from the long-standing Conservative Party in July.

The budget includes the tax increase plan proposed by Prime Minister Keir Starmer's government, amounting to 40 billion British Pounds (approximately 50.5 billion USD). Reeves stated at the time that this would be achieved through a series of new policies, including raising employers' National Insurance tax (i.e., payroll tax), increasing capital gains tax, and eliminating winter fuel payments to retirees.

Some of these policies have sparked widespread criticism. For example, the increase in National Insurance tax has prompted businesses to warn that it would reduce the willingness to hire new employees. Earlier this month, a report released by the recruitment website Indeed showed that this policy has already negatively affected job vacancies in the United Kingdom.

(British pound against the US dollar daily chart, source Easy Forex)