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UK GDP growth slows more than expected to 0.5% UK GDP growth slows more than expected to 0.5%
(about 1 hour later)
Britain’s economic growth slowed more than expected in the third quarter, hit by the biggest construction slump in three years and a manufacturing sector mired in recession.Britain’s economic growth slowed more than expected in the third quarter, hit by the biggest construction slump in three years and a manufacturing sector mired in recession.
The data represents a blow to George Osborne’s much-trumpeted “March of the makers” and further suggests any interest rate rises are unlikely until next year. The data represents a blow to George Osborne’s much-trumpeted “March of the makers” and suggests any interest rate rises are unlikely until next year.
GDP grew by 0.5% in the three months from July to September, down from 0.7% in the previous three months, the Office for National Statistics said. Most economists were forecasting 0.6%. GDP rose by 0.5% in the three months from July to September, down from 0.7% in the previous three months, the Office for National Statistics said. Most economists were forecasting 0.6% growth. Growth had bounced back strongly in the second quarter after an increase of just 0.4% from January to March.
Related: UK GDP growth figures released - live updatesRelated: UK GDP growth figures released - live updates
Chris Williamson, chief economist at economic pollsters Markit, said: “The third quarter slowdown, and warning lights from recent business surveys about the weakness intensifying in September, suggests that policymakers will want more time to assess the extent of the slowdown as we move into the fourth quarter, effectively postponing any rate hikes until next year.”Chris Williamson, chief economist at economic pollsters Markit, said: “The third quarter slowdown, and warning lights from recent business surveys about the weakness intensifying in September, suggests that policymakers will want more time to assess the extent of the slowdown as we move into the fourth quarter, effectively postponing any rate hikes until next year.”
The service industries continue to be the main driver of growth, rising 0.7% – the strongest performance since the end of 2014. The construction sector shrank 2.2%, however, and factory output dropped by 0.3%, marking the third quarter of contraction. Overall industrial output benefited from a bounce in oil production, as there were fewer maintenance shutdowns than in previous years. Sterling was left unmoved by the news, and Richard de Meo, managing director at foreign exchange firm Foenix Partners, said the dip in growth was “not enough to disrupt market expectations for interest rate hikes in mid-2016”.
The service industries continued to be the main driver of growth, expanding by 0.7% – the strongest performance since the end of 2014. The construction sector shrank by 2.2%, however, and factory output dropped by 0.3%, marking the third quarter of contraction.
The ONS said that the unusually wet weather in August may have been a factor behind the construction slump, and its quarterly estimate assumed the sector bounced back with 1.3% growth in September.The ONS said that the unusually wet weather in August may have been a factor behind the construction slump, and its quarterly estimate assumed the sector bounced back with 1.3% growth in September.
Manufacturing has been affected by cooling global demand – especially from China and other emerging markets – exacerbated by the strong pound. Manufacturing has been affected by cooling global demand – especially from China and other emerging markets – exacerbated by the strong pound. Steel production slumped 7% in the third quarter, even before the closure of the Redcar steelworks in north-east England was announced.
Overall industrial output was boosted by strong mining output following tax changes, and a bounce in oil production, as there were fewer maintenance shutdowns than in previous years, but production growth more than halved to 0.3% from 0.7% in the previous quarter. Agriculture grew by 0.5%.
Following the disappointing figures, the chancellor said the UK economy continued to outperform other major economies but that Britain “must live within our means”.Following the disappointing figures, the chancellor said the UK economy continued to outperform other major economies but that Britain “must live within our means”.
GDP is 0.5%. UK continues to outperform other major economies. But global risks mean we go on with tough decisions to live within our meansGDP is 0.5%. UK continues to outperform other major economies. But global risks mean we go on with tough decisions to live within our means
Growth had bounced back strongly in the second quarter after an increase of just 0.4% from January to March.
This is the first official snapshot of economic growth for the quarter and could be subject to revisions in the months ahead.This is the first official snapshot of economic growth for the quarter and could be subject to revisions in the months ahead.
Zach Witton, deputy chief Economist at EEF, the manufacturers’ organisation, said: “Growth was partly dragged back due to manufacturing remaining in recession. The weakness was broad based across the sector as recent challenges have been exacerbated by the sharp contraction in iron and steel and signs of slower demand from the consumer sector. Investec economist Chris Hare noted that the construction data tend to be volatile. “So looking ahead to Q4, we expect growth to start edging up again, closer to the 0.7% mark as the Q3 construction drag goes away, manufacturing growth regains some poise and service sector output growth remains firm.”
“Yet the news wasn’t wholly negative, with bright spots including transport equipment doing well thanks to a backlog of aircraft orders and manufacturers still maintain some, albeit muted, confidence about their longer-term business prospects.” Zach Witton, deputy chief Economist at EEF, the manufacturers’ organisation, said: “The news wasn’t wholly negative, with bright spots including transport equipment doing well thanks to a backlog of aircraft orders and manufacturers still maintain some, albeit muted, confidence about their longer-term business prospects.”
•An alert to this story said the UK economy had “contracted”. That should have read “slowed”.•An alert to this story said the UK economy had “contracted”. That should have read “slowed”.