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| Weakening UK trade puts the brakes on GDP growth | Weakening UK trade puts the brakes on GDP growth |
| (35 minutes later) | |
| The UK’s economy has slowed after a record drag on growth from weak trade, leaving household spending to drive the recovery. | The UK’s economy has slowed after a record drag on growth from weak trade, leaving household spending to drive the recovery. |
| The Office for National Statistics stuck to its earlier estimate that GDP grew 0.5% in the third quarter of the year, down from 0.7% in the second quarter. But fresh details published with this latest picture of the economy showed net trade, the gap between exports and imports, took a record 1.5 percentage points off quarterly growth. | The Office for National Statistics stuck to its earlier estimate that GDP grew 0.5% in the third quarter of the year, down from 0.7% in the second quarter. But fresh details published with this latest picture of the economy showed net trade, the gap between exports and imports, took a record 1.5 percentage points off quarterly growth. |
| GDP growth slows | GDP growth slows |
| Confirmation that growth has slowed is likely to intensify pressure on the chancellor, George Osborne, after leading thinktanks cast doubt on his tax and spending plans in this week’s autumn statement. The Institute for Fiscal Studies called Osborne’s 2020 target to run a surplus on the public finances “completely inflexible” and warned there was a 50-50 chance he would have to revisit his plans. | |
| The news of a trade drag on growth is also at odds with the chancellor’s pledge to rebalance the UK economy towards more exports and away from reliance on consumer spending. However, in the latest quarter the weaker trade picture was a result of a jump in imports rather than weakness in exports, economists noted. | The news of a trade drag on growth is also at odds with the chancellor’s pledge to rebalance the UK economy towards more exports and away from reliance on consumer spending. However, in the latest quarter the weaker trade picture was a result of a jump in imports rather than weakness in exports, economists noted. |
| Imports rose at the fastest pace in almost a decade, up 5.5% on the quarter while exports grew a smaller 0.9% in the third quarter. | Imports rose at the fastest pace in almost a decade, up 5.5% on the quarter while exports grew a smaller 0.9% in the third quarter. |
| Manufacturing recession | Manufacturing recession |
| The figures also showed manufacturing output fell 0.4% in the latest quarter, confirming that the factory sector is in recession after three consecutive quarters of contraction. That follows warnings from UK manufacturers that demand from abroad has waned as the global economy slows, led by China and other emerging market countries. | The figures also showed manufacturing output fell 0.4% in the latest quarter, confirming that the factory sector is in recession after three consecutive quarters of contraction. That follows warnings from UK manufacturers that demand from abroad has waned as the global economy slows, led by China and other emerging market countries. |
| The construction sector, where growth tends to be volatile from quarter to quarter, contracted 2.2% in the third quarter, the ONS said. | The construction sector, where growth tends to be volatile from quarter to quarter, contracted 2.2% in the third quarter, the ONS said. |
| It was left to consumer spending to be the main driver of GDP growth over the July to September quarter. Household spending was up 0.8%, its ninth consecutive quarter of growth. | It was left to consumer spending to be the main driver of GDP growth over the July to September quarter. Household spending was up 0.8%, its ninth consecutive quarter of growth. |
| “In terms of the breakdown, consumer spending did most of the heavy lifting ... Business investment was also punchy,” said Alan Clarke, economist at Scotiabank. | “In terms of the breakdown, consumer spending did most of the heavy lifting ... Business investment was also punchy,” said Alan Clarke, economist at Scotiabank. |
| “At the other extreme, net exports were a big drag.” | “At the other extreme, net exports were a big drag.” |
| Net trade drag | Net trade drag |
| The data showed GDP was up 2.3% in the third quarter on a year earlier. Last year, the UK economy grew 2.9%, beating other major industrialised nations. | |
| John Hawksworth, PwC’s chief economist, said he still expected the UK to remain one of the fastest-growing economies in the G7 group of nations with GDP up 2.4% in both 2015 and 2016. | John Hawksworth, PwC’s chief economist, said he still expected the UK to remain one of the fastest-growing economies in the G7 group of nations with GDP up 2.4% in both 2015 and 2016. |
| “Today’s figures show no change in the big picture of a steady UK economic recovery led by a broad-based expansion in private sector services, but held back by weakness in both manufacturing and construction in the third quarter,” he said. | “Today’s figures show no change in the big picture of a steady UK economic recovery led by a broad-based expansion in private sector services, but held back by weakness in both manufacturing and construction in the third quarter,” he said. |
| The Treasury’s independent forecaster, the Office for Budget Responsibility, is estimating that GDP will grow 2.4% both this year and next. | The Treasury’s independent forecaster, the Office for Budget Responsibility, is estimating that GDP will grow 2.4% both this year and next. |