UK GDP grows strongly, but with hints of tougher times ahead

UK GDP ex­pands 0.6% in Q3 af­ter 0.4% growth in Q2; trade boosts econ­omy, but in­vest­ment slides ahead of Brexit; UK out­paces eu­ro­zone by large mar­gin in Q3; but sur­veys point to slower growth to­wards year-end

Gulf Times Business - - FRONT PAGE -

Bri­tain en­joyed its fastest eco­nomic up­turn since late 2016 dur­ing the third quar­ter, spurred by a surge in con­sumer spend­ing over the hot sum­mer and the soc­cer World Cup, which now ap­pears to be tail­ing off ahead of Brexit.

The econ­omy ex­panded 0.6% in the three months to Septem­ber, match­ing the con­sen­sus fore­cast in a Reuters poll of econ­o­mists and ac­cel­er­at­ing from 0.4% the quar­ter be­fore, the Of­fice for Na­tional Sta­tis­tics said yes­ter­day.

Bri­tain’s growth out­paced the eu­ro­zone’s by a large mar­gin over the quar­ter, and fi­nance min­is­ter Philip Ham­mond said the fig­ures showed the un­der­ly­ing strength of the econ­omy.

Still, an­a­lysts said there were wor­ry­ing sig­nals for the months ahead, de­spite bet­ter-than-ex­pected trade data.

Busi­ness in­vest­ment un­ex­pect­edly fell 1.2%, the big­gest drop since early 2016, adding to signs of ris­ing cau­tion among com­pa­nies ahead of Bri­tain’s sched­uled de­par­ture from the Euro­pean Union in March. “Look­ing be­neath the sur­face, the uptick is skewed by the sum­mer’s buoyant, World Cup-fu­elled re­tail ac­tiv­ity,” said Tej Parikh, se­nior econ­o­mist at the In­sti­tute of Directors. “With or­der books weak­en­ing and ma­jor hir­ing and in­vest­ment de­ci­sions be­ing held back, busi­ness ac­tiv­ity looks set to lose steam in the com­ing quar­ters.” In Septem­ber alone, Bri­tain’s econ­omy stag­nated for a sec­ond month run­ning, com­pared with fore­casts for a 0.1% ex­pan­sion, while the an­nual growth rate held at 1.5%.

Ster­ling and Bri­tish govern­ment bonds showed lit­tle re­ac­tion to the data, which were largely as ex­pected. The fig­ures showed net trade con­trib­uted 0.8 per­cent­age points to the eco­nomic growth rate in the third quar­ter, the big­gest boost since early 2016, as car im­ports dropped sharply — tal­ly­ing with weak car sales data.

House­hold spend­ing re­mained solid, ex­pand­ing 0.5% af­ter a 0.4% rise in the sec­ond quar­ter. Sur­veys of com­pa­nies over the last month sug­gest growth looks likely to lose mo­men­tum in the fi­nal months of 2018, as the sea­sonal spend­ing boost from in­creased eat­ing and drink­ing fades away.

A Reuters poll of econ­o­mists pub­lished yes­ter­day sug­gested growth in the fourth quar­ter would de­cline to 0.3%, a view shared by the Bank of Eng­land.

Bri­tain’s growth slowed af­ter the June 2016 Brexit vote, its an­nual rate slip­ping from top spot among the Group of Seven group of rich na­tions to jostling with long-term lag­gards Ja­pan and Italy for last place. Con­sumers in par­tic­u­lar were squeezed by the jump in in­fla­tion that fol­lowed the pound’s tum­ble af­ter the ref­er­en­dum, es­pe­cially as wages have failed to keep up.

On Thurs­day, the Euro­pean Com­mis­sion fore­cast Bri­tain would rank joint­bot­tom with Italy for eco­nomic growth among EU na­tions in 2019.

Sky­scrapers and of­fice build­ings are pic­tured in the City of Lon­don, as pedes­tri­ans use Water­loo Bridge to cross over the River Thames. Bri­tain’s econ­omy has grown at the fastest pace in nearly two years as strong ex­ports and solid house­hold spend­ing offset slump­ing busi­ness in­vest­ment, ac­cord­ing to official data.

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