GB: GDP decline stronger than expected in Q3, pound retreats

Published 22 Dec 2022 at 11:20

LONDON, Dec 21 (Reuters) – Britain’s economy shrank in the third quarter more than first estimated, final figures from the Office for National Statistics (ONS) showed on Thursday, sending the British pound lower.

UK gross domestic product (GDP) fell 0.3% in the July-September period, against a 0.2% drop announced in the first estimate.

On an annual basis, GDP shows growth of 1.9% against a previously announced gain of 2.4%.

According to the ONS, these figures place the UK last among the G7 countries in terms of quarterly economic growth.

In financial markets, the British pound fell to its lowest level since November 15 against the single European currency on Thursday at 87.99 pence to one euro.

Analysts see downside risks to the pound until the end of the year as the UK economy remains mired in a “stagflationary” environment characterized by high inflation combined with weak growth.

“We continue to believe in the possibility that EUR/GBP (euro against pound) could rise with a possible greater divergence in the policy decisions of the European Central Bank (ECB) and the Bank of England (BoE) at the beginning of the next year,” said Derek Halpenny, director of research at MUFG Bank.

The ECB stressed last week, after raising interest rates by 50 basis points, that it would continue to tighten credit costs at a steady pace as the BoE looks to be nearing the end of its monetary tightening cycle. (Reporting by Andy Bruce and Stefano Rebaudo; French version by Claude Chendjou, editing by Tangi Salaün and Blandine Hénault)

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