INSTANT VIEW - GDP shrinks more than expected

LONDON (Reuters) - The economy shrank more than expected and for the first time in 16 years in the third quarter of 2008, official data showed on Friday.

The figures are likely to boost expectations that the Bank of England will cut interest rates by another 50 basis points next month as the economy looks like heading into its first recession since the early 1990s.

ANALYST COMMENTS

AMIT KARA, UBS

"Clearly worse than expected. This is obviously going to be the first of a series of negative numbers that we are going to get."

"The risks are that this is going to be a pretty severe recession ... We think at least 50 basis points (cut) at the next (MPC) meeting, unless the meeting is brought forward. We are looking for rates at 3 percent by the middle of next year. The risk is it could be lower than that.

"The services drop was big. I was particularly intrigued at the distribution, hotels and catering sector -- that really did collapse quite markedly. This is clearly discretionary spending that is getting hurt. I'm just a bit surprised it's not been showing up as vividly in the retail sales numbers."

HOWARD ARCHER, GLOBAL INSIGHT

"While contraction in the third quarter does not put the UK officially into technical recession yet (this is defined by two successive declines in quarter-on-quarter and the economy was flat in the second quarter) the depth of the decline means that we are there to all intents and purposes. Indeed, there can be no doubt that further marked GDP contraction will occur in the fourth quarter as consumers retrench in the face of major headwinds and investment is pared back sharply. While exports are benefiting from the weaker pound, this will be increasingly outweighed by very weak domestic demand in key overseas markets.