UK's economic performance has raised concerns as the Office for National Statistics (ONS) reported a contraction in the October gross domestic product (GDP) by 0.1% month-over-month, according to a report by Deutsche Bank (ETR: DBKGn ) Research.
Deutsche Bank's nowcast models indicate a potential negative tail risk emerging for Q4-24 quarterly GDP growth (-0.1% q-o-q to 0.1% q-o-q). The report also suggests that the risk of a quarterly contraction is no longer negligible.
"To be sure, we warned of downside risks in our preview, with our nowcast models pointing "to a larger negative tail risk," the report stated.
This marks the fourth GDP disappointment in five months, signaling potential trouble for the economy's growth in the fourth quarter of 2024.
Deutsche Banks expects that the GDP slowdown have significant impact on policies. A lower GDP will hit cash receipts, raising the risk of a funding shortfall, based on the OBR's current projections.
For monetary policy makers, the slowdown in growth may give the committee some breathing room in the midst of firming price pressures owing to the increase and pass-through of the employer National Insurance Contributions hike.
Looking ahead, October labour data is expected to set the tone for Q4-24 growth. Deutsche Banks anticipates a slowdown in pay momentum, while expecting overall employment and unemployment rates broadly unchanged.
Additionally, it excepts a 3% drop in job vacancies, which will increase the risks of contraction in the quarter.
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