Economic Overview - The UK economy contracted in September due to concerns over tax increases and a cyberattack on Jaguar Land Rover, increasing pressure on the Labour government ahead of the critical budget announcement on November 26 [1] - The UK's GDP fell by 0.1% month-on-month in September, against an expectation of 0%, and grew by 1.1% year-on-year, below the expected 1.3% [1] - The third quarter GDP growth was 0.1% quarter-on-quarter, below the expected 0.2%, and 1.3% year-on-year, also below the expected 1.4% [1] Sector Performance - In September, UK industrial output decreased by 2%, the largest decline since January 2021, with manufacturing output down by 1.7%, marking the biggest drop since April 2024 [1] - Seven out of thirteen manufacturing sub-sectors reported monthly declines, with the production of motor vehicles, trailers, and semi-trailers plummeting by 28.6% [1] - The electricity, gas, steam, and air conditioning supply sector also saw a decline of 3.4%, alongside a 3.4% drop in mining and quarrying [1] Business Investment - Business investment in the third quarter fell by 0.3%, better than the expected 0.7% decline, but marking the second consecutive quarter of decline, indicating ongoing weak corporate spending [1] - Year-on-year, business investment grew by only 0.7%, a significant slowdown from the previous quarter's 3% growth [1] Monetary Policy Outlook - Recent economic signals have increased the likelihood of a rate cut by the Bank of England in December, with market expectations for a rate cut now at approximately 82% [1] - Disappointing GDP data may pave the way for the Bank of England to support further easing of monetary policy, creating conditions for a potential rate cut in December [2] - The anticipated fiscal tightening in the upcoming budget could range from 0.5% to 1% of GDP, which may further encourage market expectations for a rate cut, negatively impacting the British pound [3]