The British public’s expectations for inflation over the next year have fallen, which could help nudge the Bank of England towards cutting interest rates next week.

The public’s median expectation for the rate of inflation in the year ahead fell to 3.5% from 3.6% in August, according to the Bank’s quarterly inflation attitudes survey.

For inflation in the longer term (eg in five years’ time), expectations fell to 3.7% from 3.8%.

While the Bank should welcome the drop, they might note that expectations are still well above their target of 2%.

The net satisfaction rate in the Bank’s own performance fell to -1%, down from 2% in August.

Today’s disappointing GDP figures show that the UK economy has seen no growth since June, points out the National Institute of Economic and Social Research.

NIESR associate economist Fergus Jimenez-England warns it is not yet clear whether last month’s budget will lead to stronger growth, saying:

This is especially concerning given that October’s GDP was lifted by a one-off rebound in manufacturing activity following the JLR cyber-attack.

Contractions in both services and construction indicate broad-based weakness, potentially reflecting uncertainty in the run-up to the Budget.

Recent survey data points to continued sluggishness for the remainder of the quarter, though with the Budget now behind us, there is scope for improvement in December.

Looking ahead, the Autumn Budget’s doubling of fiscal headroom should help reduce uncertainty over the coming year. Whether that will translate into stronger economic activity remains to be seen.”

Oof! Britain’s financial regulator has hit lender Nationwide with a £44m fine for operating “inadequate anti-financial crime systems and controls” from October 2016 to July 2021.

The Financial Conduct Authority says Nationwide had ineffective systems for keeping up-to-date due diligence and risk assessments for all its personal current account customers and for monitoring their transactions.

It adds that Nationwide was also aware that some of those customers were using their personal accounts for business activity, in breach of its terms. As Nationwide didn’t, then, offer business current accounts it didn’t have the correct processes to manage potential financial crime risks.

Therese Chambers, joint executive director of enforcement and market oversight at the FCA, said:

‘Nationwide failed to get a proper grip of the financial crime risks lurking within its customer base. It took too long to address its flawed systems and weak controls, meaning red flags were missed with serious consequences.

These failings have cost the taxpayer £800,000 in Covid fraud, according to the FCA who say:

In one serious case, Nationwide missed opportunities to identify a customer using personal current accounts to receive fraudulent Covid furlough payments. The customer received 24 payments totalling £27.3m over 13 months, with £26.01m of this deposited over 8 days.

His Majesty’s Revenue & Customs (HMRC) recovered £26.5m, but approximately £800,000 remains unrecovered.

Goldman Sachs predict the Bank of England will cut interest rates next week too.

In a note published yesterday, Goldman economists James Moberly suggests the Bank’s monetary policy committee could split 6-3 in favour of cutting borrowing costs, a month after voting 5-4 to leave rates on hold.

In this scenario, governor Andrew Bailey and deputy governor Clare Lombardelli would leave the ‘no change’ gang and join the cutters.

That would leave chief economist Huw Pill, and external members Megan Greene and Catherine Mann, voting to leave rates on hold due to concerns about inflation.

Moberly explains:

Since the last MPC meeting, the data have come in on the softer side, with a range of indicators pointing to further labour market weakening.

Although the measures introduced at the Budget are likely to generate a small near-term growth boost, they should notably lower inflation next year. As such, the Committee is very likely to cut Bank Rate by 25bp at next week’s (December 18) meeting. We expect a 6-3 vote split – with Pill, Greene, and Mann dissenting in favour of a hold – although the number of dissents (including Lombardelli’s vote) will likely depend on next week’s data.

That data will include the latest unemployment and wage reports, on Tuesday morning.

There is a danger that the UK economy shrinks in the final quarter of the year, says Sanjay Raja, chief UK economist at Deutsche Bank.

That would put the UK on the brink of recession (two quarterly contractions in a row).

Raja warns that the road to the new year will be bumpy, saying:

In fact, after today’s data, our nowcasts for growth in the fourth quarter are now running even lower at 0% q/q (our official forecast is for a 0.1% q/q expansion). More worryingly, the skew around our nowcasts lean more negative than positive. And for the first time this year, we see some meaningful risk of a marginal quarterly contraction in real GDP.

If realised this would mark the first quarterly contraction in real GDP since Q4-23. Indeed, Budget uncertainty combined with weak hiring and rising unemployment fear will likely see spending and investment more subdued to end the year.

The good news is that Deutsche Bank expect the UK economy to shake off much of the uncertainty heading into the new year; they forecast growth of 0.5% in January-March 2026, meaning recession would be avoided.

Berenberg economist Andrew Wishart reckons deteriorating economic fundamentals, rather than budget uncertainty, are responsible for the contraction in GDP in October.

Wishart explains that this could prompt an interest rate cut next week:

The UK economy has faltered more dramatically than we expected. The 0.1% mom fall in monthly GDP in October (consensus forecast +0.1% mom) extends the cumulative decline in output since June to 0.4%.

The more recent survey data suggests that the malaise has continued since. We suspect that deteriorating fundamentals rather than a Budget-related setback in confidence are to blame, so a recovery seems unlikely in the near term.

This should help ensure that inflation drops swiftly in 2026, allowing the Bank of England to cut bank rate from 4.00% today to 3.00% by next July. The first of these reductions will likely come next Thursday 18 December. Lower BoE rates should then pave the way for a rebound in growth over the course of 2026.

Christmas should be a bumper time for greetings cards sellers, but Card Factory has startled the City with a profits warning this morning.

Card Factory told shareholders that sales have been below expectations, saying:

Over recent months, the pressures facing the UK consumer have been well publicised. It is an inescapable fact that these pressures have impacted consumer confidence and shopping behaviour, contributing to soft high street footfall.

Those conditions have persisted as we moved into our most important trading period, leading to a UK store sales performance which is lower than our previous expectations.

Card Factory now expects to post pre-tax profits of between £55m and £60m this financial year, down from a previous forecast of £70m.

Its shares have plunged by 26% in early trading.

Shadow chancellor Sir Mel Stride has blamed the government’s ‘mismanagement’ of the economy for the unexpected fall in GDP in October, and in the August-October quarter.

Stride says:

“This morning’s news that the economy unexpectedly shrank in the three months to October is extremely concerning but it’s as a direct result of Labour’s economic mismanagement.

“Rachel Reeves promised growth but Labour has no plan for the economy – just their own survival, that’s why Reeves presented a benefits budget that rewards welfare, not work.

“For months, Rachel Reeves has misled the British public. She said she wouldn’t raise taxes on working people – she broke that promise again. She insisted there was a black hole in the public finances – but there wasn’t.”

Economists are convinced that the Bank of England will respond to the UK’s weak economic performance by cutting interest rates next week.

The Bank’s monetary policy committee will make its final decision of the year on Thursday 18th December, and a rate cut to 3.75% appears highly likely now that the economy shrunk by 0.1% in October.

Ruth Gregory, deputy chief UK economist at Capital Economics, says:

The surprise 0.1% m/m contraction in the economy in October was especially disappointing given the increase in manufacturing output, which rebounded after September’s cyber-attack induced hit, and is a further reason to expect the Bank of England to cut interest rates next Thursday.

Suren Thiru, economics director at the ICAEW, says a pre-Christmas interest rate cut is “nailed on”:

“These figures confirm an off-colour October for the economy, with pre-Budget worries paralysing activity across key sectors, despite a boost to manufacturing from Jaguar Land Rover’s return to production.

“This dismal outturn may have been followed by a similarly turbulent November with the damage to business and consumer confidence from the frenzied speculation ahead of the Budget likely to have frozen wider economic activity.

“The aftereffects from the Budget may mean that the UK’s economic prospects are poorer over the near term, with the growing tax burden and a weakening jobs market likely to keep growth notably lower than the OBR expects.

“With these downbeat figures likely to further fuel fears among rate-setters over the health of the UK economy, a December policy loosening looks nailed on, particularly given the likely deflationary impact of the Budget.”

TUC general secretary Paul Nowak urges the Bank of England to help families and businesses with a rate cut:

“Bringing our economy back on track after 14 years of Tory chaos was never going to be straightforward. A volatile international context is not making this job any easier.

“After years of falling living standards, consumer spending is still very weak.

“The Government acted to boost household incomes at the Budget – it raised minimum wage, benefitting millions across the country, cut child poverty and funded energy payments to support living standards.

“The Bank of England should now recognise the impact that the living standards crisis has had on families’ and businesses’ finances and spending - and must deliver further cuts in interest rates next week”

According to my LSEG screen, an interest rate cut is an 89% chance. Last month, the Bank split 5-4 when they voted to leave rates on hold, so it only needs one voter (likely governor Andrew Bailey) to switch sides….

A Treasury spokesperson has responded to the news that the economy shrank by 0.1% in October, saying:

“We are determined to defy the forecasts on growth* and create good jobs, so everyone is better off, while also helping us invest in better public services.

“That is why the Chancellor is taking £150 off energy bills, protecting record investment in our infrastructure, and we are backing major planning reforms, the expansion of Heathrow and Gatwick airports, and the construction of Sizewell C.”

(* – The City had expected growth of 0.1% in October, so that’s one forecast defied already….)

The 0.6% drop in construction output in October shows that the government is struggling to hit its goal of building lots more houses.

The ONS reports that this decrease came from decreases in both new work and repair and maintenance, which decreased by 0.7% and 0.6%, respectively.

At the sector level, the main contributor to the monthly decrease was private new housing, which fell by 2.4%.

The ONS identifies pre-budget uncertainty as a factor hitting the economy in October.

In its GDP report, it says:

Businesses across the production, construction and services sectors reported that they, or their customers, were waiting for the outcome of the Autumn Budget 2025 announcement on 26 November 2025.

These comments came from a range of industries, but were mainly from manufacturers, construction companies, wholesalers, computer programmers, real estate firms, and employment agencies.

Today’s GDP report also shows the economy only grew by 1.1% over the last year – a weak performance.

The ONS says:

GDP is estimated to have grown by 1.1% in the three months to October 2025, compared with the same three months a year ago. Over this period services grew by 1.5% and construction grew by 1.1%, whereas production fell by 1.3%.

GDP is estimated to be 1.1% higher in October 2025, compared with October 2024.

Here’s ONS Director of Economic Statistics Liz McKeown explaining why the economy shrank in October, and over the last three months:

“The economy contracted slightly in the latest three months, as production fell again and services growth stalled.

“Within production, there was continued weakness in car manufacturing, with the industry only making a slight recovery in October from the substantial fall in output seen in the previous month.

“Overall services showed no growth in the latest three months, continuing the recent trend of slowing in this sector. There were falls in wholesale and scientific research, offset by growth in rental and leasing and retail.”

The UK economy also shrank by 0.1% in the three months to October (a better measure than the monthly data).

The ONS says this is the first three monthly fall in real GDP since December 2023.

The UK economy shrank in October despite a small boost from the reopening of Jaguar Land Rover’s factories after a cyber attack.

The ONS reports that the services sector fell by 0.3% and construction fell by 0.6% in October.

That more than cancelled out a 1.1% rise in production activity.

Newsflash: Britain’s economy shrank unexpectedly in October, as the budget cast a shadow of uncertainty over the country.

UK GDP fell by 0.1% month-on-month in October, the Office for National Statistics reports, rather weaker than City expectations of a 0.1% increase.

That follows the 0.1% contraction in September, and no growth in August, and means the UK’s economic malaise continued in October.

The copper price, a gauge of global growth prospects, has just hit an alltime high.

The benchmark three-month copper price on the London metal exchance has hit a record high of $11,952 per metric tonnne.

And in Shanghai, copper futures have hit a new record high of 94,570 yuan per metric ton.

“Doctor Copper” is viewed as a useful measure of the overall health of the economy, as demand rises when firms are investing in new construction, manufacturing, and electrical equipment.

The Confederation of British Industry has bumped up its economic growth forecast for next year, Reuters reports, citing a temporary boost to government spending following the budget.

It also warned, though, that deep-rooted problems remain within the economy.

The business association predicted the economy will grow 1.3% next year, up from its previous forecast of 1.0% in June, bringing the CBI broadly into line with forecasts from the International Monetary Fund and the OECD.

It raised its forecast for this year to 1.4% from 1.2%, reflecting upward revisions to recent official data.

CBI chief economist Louise Hellem said:

“While it’s welcome to see our growth forecast upgraded for next year, the mood music reads more ‘cautious optimism’ than ‘cause for celebration’.”

The CBI also sees consumer prices rising by 2.6% next year, slightly more than the Bank of England forecast last month.

MPs have launched an inquiry into the role and performance of the Office for Budget Responsibility.

The all-party Commons Treasury committee will investigate the independent agency’s forecasting performance and impartiality, with the initial request for written evidence finishing at the end of January. This will then be followed by public evidence sessions.

The panel will consider whether reforms are needed 15 years after the OBR was set up by George Osborne when he was Tory chancellor.

MPs on the committee are understood to be concerned after a row broke out between the OBR and the chancellor, Rachel Reeves, over budget briefings.

Richard Hughes, the OBR’s then boss, complained to senior Treasury officials in the run-up to the budget about a flurry of leaks he said had spread “misconceptions” about the agency’s forecasts…. More here.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The important thing about last month’s budget is that we now have certainty, as one FTSE 100 CEO told me last week; no more endless speculation about which taxes might rise, for example.

But this morning, we’ll learn how much economic damage was caused by budget uncertainty in the run-up to the November’s fiscal event.

October’s GDP report, due to be released at 7am, is expected to show the economy strugled back to growth after a small contraction the previous month. GDP is forecast to have risen by 0.1% in October, having shrunk by 0.1% in September.

The restart of operations at Jaguar Land Rover’s factories in early October, after a cyber attack, should spur activity higher in the manufacturing sector.

On the other hand, though, the swirling speculation around what might be in the budget has hurt consumer sentiment and business investment; that could show up in the data too.

Michael Brown, senior research strategist at brokerage Pepperstone, points out that that this monthly data can be volatile:

On the data front, this morning’s UK GDP stats are set to show the economy having stagnated in October, largely as a result of pre-Budget uncertainty freezing business investment and consumer spending alike, though the monthly data remains very noisy indeed, with relatively little by way of signal able to be extracted from the report.

We’ll see what we can dig out of it, though.

The agenda

• 7am GMT: UK GDP report for October

• 7am GMT: UK trade report for October

• 7.45am GMT: French inflation report for November

• 8am GMT: Spanish inflation report for November

• 1.30pm GMT: US national activity index for September

• 4pm GMT: Russia’s GDP report for Q3