2021.01.1509:40:00UTC+00UK Economy Shrinks Less Than Expected In November

The UK economy contracted less than expected in November despite a second nationwide lockdown, data released by the Office for National Statistics revealed Friday.

Ending six months of growth, gross domestic product shrank 2.6 percent on month in November but slower than the 5.7 percent fall economists' had forecast. The decline reversed a 0.6 percent rise posted in October.

The current lockdown restrictions will hit economic activity more than they did in November, James Smith, an ING economist, said.

Given that the current lockdowns are likely to remain in place until mid to late March before being gradually unwound, it is likely that first quarter GDP will shrink by around 2-3 percent, the economist added.

The official data showed that the November GDP fell back to 8.5 percent below the levels seen in February 2020. GDP declined 8.9 percent in the twelve months to November.

On the production-side, construction output continued to expand, while services and production declined in November from the previous month.

Industrial production dropped marginally by 0.1 percent, in contrast to October's 1.1 percent increase. At the same time, the manufacturing sector grew 0.7 percent, but slower than the 1.6 percent rise in the prior month.

On the other hand, construction output advanced 1.9 percent from the last month, when it grew 1.5 percent.

The index of services declined 3.4 percent, the largely due to the 44 percent decline in accommodation and food services activities. This was the third largest fall on record.

Year-on-year, industrial production fell 4.7 percent, following a 5.8 percent decrease in October. Manufacturing output was down 3.8 percent versus a 6.1 percent drop in the previous month.

Another report from the ONS showed that growth in goods exports advanced to 7.5 percent from 3.2 percent. Similarly, imports growth improved to 11.9 percent from 5.9 percent.

The visible trade deficit widened to GBP 16.01 billion in November from GBP 13.29 billion in the previous month. Meanwhile, the surplus on services trade increased to GBP 11.01 billion from GBP 10.95 billion.

As a result, the total trade deficit totaled GBP 4.99 billion versus a GBP 2.33 billion shortfall in October.