UK economic growth revised upwards

The UK economy received a modest boost on Friday, after third-quarter growth figures were revised upwards.

According to the Office for National Statistics, quarter-on-quarter growth in the three months to September was 0.4%, an upward revision of 0.1 percentage points. Analysts had predicted no change.

Year-on-year, UK GDP increased 1.1%, also a 0.1 percentage point upward revision. The ONS also said that the current account deficit had narrowed to £15.9bn in the third quarter from £24.2bn in the previous three months. That was marginally above consensus expectations of £15.5bn.

Rob Kent-Smith, head of GDP at the ONS, said: "GDP growth was revised up slightly for the third quarter of 2019, as later data showed the service sector performed more strongly than previously estimated. On the other hand, new data lead to a small downward revision to growth in the last quarter of 2018.

"The UK's balance of payments deficit with the rest of the world shrank, mainly due to a jump in UK goods exports." Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "The upward revision to GDP growth leaves the year-overyear growth rate only fractionally below the Monetary Policy Committee's estimate of its trend range of a 'bit below 1.5%', weakening the case for immediate rate cuts.

"The most discouraging aspect of the national accounts is the downward revision to estimates of households' incomes in recent quarters, with the result that the saving rate now appears to have flatlined at a low level over the last three years, and not recovered as previously thought. This suggests that households don't have much scope to ride out future income shocks and carry on spending.

"Nonetheless, we still expect a recovery in consumers' confidence, a pick-up in employment and low CPI inflation to ensure that households' spending rises at a solid rate over the next couple of quarters." Howard Archer, chief economic advisor to the EY ITEM Club, said: "The UK economy saw a stronger return to growth in the quarter than previously reported. This followed the economy relapsed 0.2% in the second quarter - the first contraction since the fourth quarter of 2012 - after expansion of 0.6% in the first quarter.

"The third quarter may well have overstated the economy's underlying strength, just as the second quarter overstated its weakness and the first quarter its strength. Economic activity has been distorted by a number of factors during 2019, most notably stock-building influenced by Brexit deadlines. "Certainly the economy was faltering at the end of the third quarter; GDP dipped 0.1% month-on-month in September and falling 0.2% in August. Third quarter GDP was therefore highly dependent on strong activity in July."

The EY ITEM Club is predicting "at best" growth of just 0.1% in the fourth quarter and believes there remains a "real possibility it could stagnate". It is forecasting GDP growth of 1.3% for 2019, the weakest performance since 2009.

Meanwhile, Business confidence in the British economy has leaped to its highest level for more than three years following the Conservatives' election win, according to a survey of company directors. For the first time since spring 2018, firms have become optimistic about the economic outlook, with a key confidence measure swinging into positive territory and hitting 21% in December, up from -18% in November.

That is the highest figure since the 2016 EU referendum, according to the Institute of Directors (IoD), which polled members in the days following the election. It added that Boris Johnson's new majority government meant company directors, whatever their personal views, now had a framework around.