The UK economy grew stronger than expected in November, with GDP rising 0.3% from the previous month, according to the latest figures from the Office for National Statistics.
This was higher than analyst forecasts for 0.1% growth.
Bestinvest personal finance analyst Alice Haine said: “November growth was largely driven by a rebound in the services and manufacturing sectors, which was partly attributed to the phased restart of production at Jaguar Land Rover following the cyber attack in the autumn.”
But she warns that the struggling labor market threatens prospects for further growth as hiring slows, layoffs increase and profits continue to fall.
Haine added: “Inflation is believed to have peaked and is expected to decline over the course of 2026 – although there could be bumps along the way amid ongoing geopolitical uncertainty.
“But now that growth is subdued and the labor market is faltering, there is room for further interest rate cuts this year.
“Six cuts since August 2024 have already provided some relief for borrowers, so a seventh – perhaps as soon as February – would bring even more joy to those burdened by heavy debt or mortgage payments.”
Susannah Streeter, chief investment strategist at the Wealth Club, also believes there is a glimmer of optimism on the horizon.
She says: “While unemployment looks set to rise, prompting caution in consumer-facing sectors, inflation is cooling and interest rates have been reduced.
“This may encourage households that have built up savings to be more frugal with their money and spend more, which supports economic growth.
“With budget uncertainty now in the rear-view mirror and some of the Ministry of Finance’s tough measures for agricultural and catering farms being reversed, this could also boost business confidence in the future.”
Different figures from the ONS today revealed the steepest decline in the construction sector since 2023 for the three months to November.