UK Economy Grows at Fastest Rate Since Late 2016

Friday 9 November 2018

The UK economy grew by 0.6% in the three months to September, with warm weather boosting consumer spending, the Office for National Statistics said.

The figure for the third quarter is in line with predictions from the Bank of England and other forecasters.

However, buoyant growth in July was offset by a slowdown in August and September.

It is the highest quarterly growth figure since the fourth quarter of 2016, when the economy grew 0.7%.

Analysts warned the economy had "little underlying momentum" and growth would decline in the final three months.

The ONS also issued a separate monthly figure for September, which, like the previous month, showed zero growth.

Services, which make up three-quarters of the economy, only grew by 0.3% in the three months to September.

After a slow start to the year, construction activity grew by 2.1% in the quarter. Manufacturing also picked up after a slow second quarter, thanks to strong car manufacturing numbers for the quarter.

Household spending grew by 0.5% in the quarter, but business investment shrank by 1.2%, suggesting uncertainty among companies over the effects of Brexit.

Business investment had been expected to rise by 0.2%, according to forecasts. It has now contracted for three quarters in a row.

'Signs of weakness'

ONS head of national accounts Rob Kent-Smith said: "The economy saw a strong summer, although longer-term economic growth remained subdued. There are some signs of weakness in September, with slowing retail sales and a fallback in domestic car purchases.

"However, car manufacture for export grew across the quarter, boosting factory output. Meanwhile, imports of cars dropped substantially, helping to improve Britain's trade balance."

Suren Thiru, head of economics at the British Chambers of Commerce, said: "It remains likely that the stronger growth recorded in the third quarter is a one-off for the UK economy, with persistent Brexit uncertainty and the financial squeeze on consumers and businesses likely to weigh increasingly on economic activity in the coming quarters.

"Against this backdrop, the Bank of England's recent hawkish rhetoric looks a little misguided and risks a further weakening in business and consumer confidence.

"With inflation on a downward trajectory and the UK's growth outlook subdued, there remains sufficient scope for the central bank to keep interest rates on hold for some time yet."

Source: BBC News

Date: 9th November 2018