The UK economy contracted by 0.1 per cent during the third quarter, according to the official data released by the Office for National Statistics (ONS). The data heightens concerns that the nation may be entering a recessionary phase. This contraction comes after the ONS revised its initial estimate, which had indicated no change in economic activity for the July-to-September period. Earlier projections by economists, as cited by Reuters, largely anticipated a stable reading for the quarter.

Furthermore, the ONS revised its second-quarter data, revealing that economic output remained stagnant, contrasting with the previously reported 0.2 per cent growth. Despite these gloomy figures, recent statistics on retail sales for November offered a contrasting narrative. Retail sales surged beyond expectations, rising by 1.3 per cent compared to October figures.

In response to the data release, the British pound experienced gains against both the US dollar and the euro. However, Finance Minister Jeremy Hunt struck a cautiously optimistic tone, particularly in light of his Conservative Party's trailing position in pre-election polls. 

“The medium-term outlook for the UK economy is far more optimistic than these numbers suggest," Hunt said in a statement.

(With Reuters inputs)