UK recession might be under way after economy shrinks in Q3

Britain's economy might be in a recession, according to data that showed it shrank between July and September, shortly after finance minister Jeremy Hunt took the rare step of suggesting the Bank of England might cut interest rates to boost growth.

Gross domestic product (GDP) contracted by 0.1% in the third quarter, the Office for National Statistics (ONS) said.

It had previously estimated that the economy was unchanged from the previous three months and economists polled by Reuters had mostly expected another unchanged reading.

Similarly, second-quarter GDP was now estimated to have been flat, a cut from a previous estimate of 0.2% growth.

However, there were some more upbeat signs about the economy in separate data also published on Friday which showed retail sales in November jumped by much more than expected, increasing by 1.3% from October, boosted by discount sales.

The boost to retail sales volumes reflected heavy discounting during the Black Friday sales promotions. Sales fell over the three months to November and were still below their pre-pandemic levels, the statistics office said.

Sterling rose against the dollar and the euro immediately after the data releases.

Finance minister Hunt - whose Conservative Party is lagging far behind the opposition Labour Party in opinion polls with an election expected next year - took the unusual step of commenting on the BoE's interest rate decisions.

"There's a reasonable chance that if we stick to the course we're on, we're able to bring down inflation, the Bank of England might decide they can start to reduce interest rates," Hunt said in an interview with the Financial Times published late on Thursday