BRITAIN'S economy shrank in October, official data showed on Wednesday (13), raising the risk of a recession and testing the Bank of England's resolve to stick to its tough line against cutting to interest rates from their 15-year high.
Gross domestic product (GDP) fell by 0.3 per cent from September, the Office for National Statistics said.
A Reuters poll of economists had pointed to no change in GDP in October.
It was the first time since July that GDP had shrunk on a month-by-month basis.
Sterling fell by about a third of a cent against the US dollar and was weaker against the euro too.
Investors added to their bets on the BoE starting to cut interest rates in June 2024.
However, the central bank is widely expected to keep Bank Rate at 5.25 per cent on Thursday (14) and signal once again that it is not close to cutting them as it tries to ensure that Britain's still-high inflation rate is brought under control.
Paul Dales, chief UK economist at Capital Economics, said the October data suggested Britain might be in a recession.
"That may nudge the Bank of England a little closer to cutting interest rates, although when leaving rates at 5.25 per cent tomorrow the Bank will probably push back against the idea of near-term rate cuts," Dales said.
In the three months to October, GDP flat-lined, the ONS said, weaker than the Reuters poll forecast of a 0.1 per cent increase.
Britain's economy avoided a contraction in the July-to-September period - when it also showed no change - but some analysts think it remains at risk of a shallow recession in late 2023 and early 2024 after the BoE's increases in interest rates.
The economy has flat-lined through most of 2023, with the level of economic output now back at its January level.
The ONS data on Wednesday showed Britain's dominant services sector shrank by 0.2 per cent in October while manufacturing and construction contracted by 1.1 per cent and 0.5 per cent respectively.
The economy was 2.0 per cent bigger than immediately before the Covid-19 pandemic hit Britain in early 2020, a stronger performance than thought before recent ONS data revisions but another weak period for living standards nonetheless.
Prime minister Rishi Sunak and chancellor of the exchequer Jeremy Hunt have promised to speed up economic growth but no significant pickup is expected before a national election that Sunak must call before January 2025.
"October’s negative outturn puts the prime minister’s target to get the economy growing in jeopardy, with high inflation and borrowing costs likely to suppress economic activity in November and December," Suren Thiru, economics director at ICAEW, an accountancy body, said.
Hunt said it was inevitable that the economy would feel the hit from higher interest rates but it was well placed to start growing again after he announced cuts to some business taxes last month.
Separate data showed Britain posted a larger-than-expected goods trade deficit in October at £17 billion, against expectations for a £14 billion gap.
Exports to the European Union - which is similarly at risk of recession - fell sharply. Adjusted for inflation, goods exports to the bloc that Britain used to belong to fell for a third month in a row and hit their lowest level since mid-2009 excluding the large swings seen during the Covid-19 pandemic.
CHANCELLOR Rachel Reeves has said the government must support the Bank of England in bringing down inflation while also focusing on growth, ahead of a budget later this year that is expected to include tax rises.
Last week, Reeves said the economy was not “broken” as she announced November 26 as the date for her annual budget.
She pledged to keep a tight hold on spending to reduce inflation and borrowing costs amid concerns over Britain’s fiscal outlook.
Inflation in Britain was the highest among the Group of Seven economies at 3.8 per cent in July. The Bank of England expects it to peak at 4 per cent this month before gradually falling back to its 2 per cent target by the second quarter of 2027.
Prime minister Keir Starmer has said Labour inherited a difficult economic situation from the Conservatives after last year’s election.
Tax increases on businesses, efforts to cut welfare spending, and ongoing arrivals of migrants on small boats have hurt the government’s standing.
Starmer reshuffled his ministerial team last week in an effort to reset his government, though Reeves remained in place. At the first meeting of the new team, Reeves said that controlling inflation was a key priority.
“The government was focused on going further to support the Bank of England in reducing inflation, controlling public spending and driving growth,” a Downing Street spokesperson said after the meeting.
British 20- and 30-year gilt yields reached their highest levels since 1998 last week, with investors watching Britain’s fiscal situation and worried Reeves’ budget could slow growth without generating much tax revenue.
Economists have also warned that some possible tax measures in the budget, such as higher fuel duties and other levies, could add to inflation in the short term.
Previous government decisions on energy policy, as well as increases in employers’ national insurance contributions and the minimum wage, have also been linked to Britain’s high inflation rate.
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US president Donald Trump (R) and Indian prime minister Narendra Modi hold a joint press conference in the East Room at the White House on February 13, 2025 in Washington, DC. (Photo by Andrew Harnik/Getty Images)
US PRESIDENT Donald Trump urged EU officials to hit China with tariffs of up to 100 per cent as part of a strategy to pressure Russian president Vladimir Putin, according to a US official and an EU diplomat.
China and India are major purchasers of Russian oil and, as such, they play a vital role in keeping Russia's economy afloat as it continues to pursue its expanded invasion of Ukraine, which began in 2022.
Trump made the request, which was conveyed via conference call, to EU sanctions envoy David O'Sullivan and other EU officials. The EU delegation is currently in Washington to discuss sanctions coordination.
The EU diplomat said the US had indicated it was willing to impose similar tariffs if the European Union heeded the US request.
"They are basically saying: We'll do this but you need to do it with us," the diplomat said.
The US request, if heeded, would result in a change of strategy for the EU, which has preferred to isolate Russia with sanctions rather than tariffs.
China firmly opposes the US applying such so-called economic pressure, its foreign ministry said at a regular press briefing on Wednesday, adding that it also opposed the using of China in discussions on Russia.
Trump, whose request was first reported by the Financial Times, has frequently threatened to impose tariffs on India and China as punishment for their purchases of Russian crude.
While Trump did hike tariffs on India over the summer by 25 percentage points in part due to its economic relationship with the Kremlin, Trump has yet to pull the trigger on the more punishing options he has floated.
At times, he has complained that Europe itself has not fully decoupled from Russia, which supplied about 19 per cent of EU gas imports last year although the bloc says it is committed to fully ending its dependency on Russian energy.
Later on Tuesday (9), Trump suggested that the US could in fact boost trade with India, writing in an evening social media post that the U.S. and India are working to address trade barriers between the nations. He added that he was looking forward to speaking with Indian prime minister Narendra Modi.
(Reuters)
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Donald Trump and Narendra Modi shake hands as they attend a joint press conference at the White House on February 13, 2025.
Trump says he will speak to Modi in the coming weeks amid trade talks
Modi calls US and India "close friends and natural partners"
Trade officials from both countries may restart meetings in September
US-India trade reached $129 billion in 2024 with a $45.8 billion US deficit
US PRESIDENT Donald Trump said on Tuesday his administration is continuing negotiations to address trade barriers with India and that he would speak to prime minister Narendra Modi, indicating a possible reset after recent friction.
Trump said he looked forward to speaking to Modi in the "upcoming weeks" and expressed confidence that the two sides could reach an agreement.
"I feel certain that there will be no difficulty in coming to a successful conclusion for both of our Great Countries," he said in a post on social media.
Modi responds with optimism
On Wednesday, Modi said Washington and New Delhi "are close friends and natural partners." He added that teams from both sides were working to conclude the trade discussions soon.
"I am also looking forward to speaking with President Trump. We will work together to secure a brighter, more prosperous future for both our people," Modi said in a social media post.
India's shares rose over 0.5 per cent after the remarks from both leaders.
Trade deal uncertainty
Trump had said for months that a trade deal was close, but later doubled tariffs on Indian imports to 50%, raising doubts about the future of the U.S.-India relationship.
In recent weeks, Trump and top US officials criticised India for buying oil from Russia, saying New Delhi was funding the war in Ukraine, a charge India denies.
At the same time, Modi has engaged with China and Russia. He visited China last month for a summit hosted by Chinese President Xi Jinping and was also seen with Russian president Vladimir Putin.
Analysts cautious
"While the social media statements by Trump and Modi signal a potential rapprochement between the U.S. and India, it is still premature to assume that a resolution will arrive swiftly," Madhavi Arora, economist at Emkay Global, said.
"With Trump, we will need to wait for more concrete signals that a deal is in the offing."
Meetings to restart in September
Trade officials from India and the US may meet in September to restart in-person discussions, CNBC-TV18 reported, citing sources. A US trade negotiators’ visit to New Delhi scheduled for August 25-29 was cancelled after talks stalled.
India's trade ministry declined to comment on reports of new meetings.
According to US Census Bureau data, two-way goods trade between the US and India reached $129 billion in 2024, with a $45.8 billion US trade deficit.
Tariffs and EU pressure
Trump recently said India had offered to reduce tariffs on US goods to zero but described the offer as late, saying the country should have acted earlier.
Reuters reported that Trump urged the European Union to impose 100% tariffs on China and India as part of pressure tactics against Russian president Vladimir Putin.
Indian officials in New Delhi said they do not expect the EU to take measures against India and that assurances had been given that EU trade talks would not be disrupted.
INDIA must take an investor-centric approach to attract global funding for its growing sustainable infrastructure needs, the UK-India Infrastructure Financing Bridge (UKIIFB) said in a report released in London on Monday.
The UKIIFB, co-chaired by NITI Aayog and the City of London Corporation, completed one year this week. The group was launched in September last year to help bridge the gap between global investor interest and infrastructure projects in India.
Over the past year, the steering board of the group has consulted on projects such as national highways and regional rapid transport in India. The result is a report with proposals and recommendations to improve investor confidence and financing.
“The transformative UK-India Infrastructure Bridge, jointly steered by India's visionary policy think-tank NITI Aayog and the historic City of London Corporation, is unlocking vast international capital for India's infrastructure revolution,” said BVR Subrahmanyam, CEO of NITI Aayog and Co-Chair of the UKIIFB.
“This landmark partnership draws on India's unmatched capacity for high-growth, sustainable ventures and aligns it with the UK's proven skills in project finance and strategic execution,” he said.
“Together, we are crafting a robust framework to accelerate India's ambitious goals in smart cities, renewable energy, and connectivity,” he added.
Subrahmanyam said the collaboration under the UKIIFB strengthens India’s progress towards becoming a global economic power by combining domestic leadership with international cooperation.
The UKIIFB aims to build bilateral collaboration in project finance to meet India’s demand for sustainable infrastructure growth. Chris Hayward, Policy Chairman of the City of London Corporation and Co-Chair of the UKIIFB, said the initiative plays a “vital role” in mobilising capital for India’s critical infrastructure.
“This report makes a powerful case for action, outlining practical steps to make Indian infrastructure projects more attractive to global investors,” said Hayward, as he released the one-year report with Subrahmanyam.
“At its heart, the findings highlight a clear truth: international investors need clarity, confidence, and consistency – and India's growth ambitions deserve a financing model that matches their scale,” he said.
The report notes that India’s infrastructure demand is being driven by rapid urbanisation and a growing middle class. It adds that the target of USD 4.5 trillion investment in infrastructure by 2030 cannot be achieved through domestic investment alone.
For its second year, the UKIIFB has set out key proposals, including adopting an investor-centric approach to align with global investor priorities on risk, value and returns. It also calls for measures to address outdated perceptions of India’s infrastructure sector.
Other recommendations include aligning with global standards, enhancing transparency and risk management to build investor confidence, and creating a supportive environment for infrastructure development by fostering partnerships with local industry.
The City of London Corporation, the governing body of London’s financial district, leads the UK side of the partnership. The UKIIFB was launched as part of the UK Economic and Financial Dialogue (EFD) and is supported by a steering committee with members from the UK Treasury, construction, engineering and legal firms from both countries.
In its first year, the committee was tasked with advising policymakers on removing barriers to international private sector investment in Indian infrastructure and helping projects reach the stage where they are ready to attract investment.
(With inputs from agencies)
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Sitting at the centre of a long table, Trump was flanked by First Lady Melania Trump and Microsoft co-founder Bill Gates on one side, and Meta CEO Mark Zuckerberg on the other. (Photo: Getty Images)
US PRESIDENT Donald Trump praised Microsoft CEO Satya Nadella and Google CEO Sundar Pichai during a White House dinner with top technology executives on Thursday. The two Indian-American leaders thanked him for his leadership and for policies in the technology and AI sectors.
Trump described the gathering as a “high IQ group,” calling the executives “the most brilliant people.” Sitting at the centre of a long table, Trump was flanked by First Lady Melania Trump and Microsoft co-founder Bill Gates on one side, and Meta CEO Mark Zuckerberg on the other. Pichai and Apple CEO Tim Cook sat across from him, while Nadella was seated toward one end of the table.
“It’s an honour to be here with this group of people. They’re leading a revolution in business and in genius and in every other work you can imagine,” Trump said.
After his remarks, Trump invited the technology leaders to share their thoughts.
Pichai said the “AI moment is one of the most transformative moments any of us have ever seen or will see in our lifetimes. So making sure the US is at the forefront.” He called the White House’s “AI Action Plan,” announced in July, a “great start.”
“We look forward to working together. And thanks for your leadership,” Pichai told Trump. “Great job you’re doing. Incredible, really,” Trump replied.
Turning to Nadella, Trump said the Microsoft chief “has done a pretty good job” and pointed to Microsoft stock rising from USD 28 to over USD 500. “What a job you’ve done,” Trump said.
Nadella thanked Trump “for bringing us all together” and for policies that support US leadership in technology. He added that market access and global trust in American technology were key.
“I think that everything that you are doing in terms of setting in place the platform where the rest of the world can not only use our technology, but trust our technology more than any other alternative, is perhaps the most important issue, and you and your policies are really helping a lot,” Nadella said.
Nadella also thanked the First Lady for hosting a discussion on AI and economic opportunity. Trump responded: “A really amazing job you’ve done.”
Earlier in the day, Melania Trump hosted a meeting of the White House Task Force on Artificial Intelligence Education, joined by Pichai, IBM CEO Arvind Krishna and other industry leaders.
Speaking after Nadella, Gates said he is now in the second phase of his career, “giving away all the wonderful money that Satya’s good work has helped multiply a lot,” drawing laughter from Trump.
During the dinner, Trump asked Pichai about Google’s investment plans. Pichai said the company would invest USD 250 billion in the US over the next two years. “It’s great. We are proud of you. A lot of jobs,” Trump responded.
Trump also asked Nadella about Microsoft’s investment. Nadella said the company invests about USD 75–80 billion each year in the US. “Very good, thank you very much,” Trump said.
Responding to media questions at the event, Trump repeated his claim that he had “settled” seven wars, without naming them. He added that three of those wars had lasted 31, 34 and 37 years. Trump also said he would soon speak with Russian President Vladimir Putin, adding, “We are having a very good dialogue.”
Other attendees included Google co-founder Sergey Brin, OpenAI CEO Sam Altman and Oracle CEO Safra Catz.