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UK set to avoid recession despite poor August | UK set to avoid recession despite poor August |
(32 minutes later) | |
The UK's economy is expected to avoid a recession after showing better-than-expected growth in the three months to the end of August. | |
The 0.3% three-month rise came despite a contraction during August itself. | |
The economy shrank by 0.1% during the month, the Office for National Statistics (ONS) said, but growth in July was revised upwards to 0.4%. | The economy shrank by 0.1% during the month, the Office for National Statistics (ONS) said, but growth in July was revised upwards to 0.4%. |
The ONS said weakness in the manufacturing sector was offset by buoyant TV and film production. | The ONS said weakness in the manufacturing sector was offset by buoyant TV and film production. |
"Services provided [the] majority of the growth over the three months, with production and manufacturing falling back," said Rob Kent-Smith, head of GDP at the ONS. | "Services provided [the] majority of the growth over the three months, with production and manufacturing falling back," said Rob Kent-Smith, head of GDP at the ONS. |
The growth figures are being watched closely for signs of recession - defined as two consecutive quarters of contraction - after the economy shrank in the second quarter for the first time since 2012. | The growth figures are being watched closely for signs of recession - defined as two consecutive quarters of contraction - after the economy shrank in the second quarter for the first time since 2012. |
The next quarter runs until the end of September so the August data is the second month in the third quarter. | |
The contraction during August is not, however, expected to indicate a recession is looming. | The contraction during August is not, however, expected to indicate a recession is looming. |
The ONS said the economy would have to contract by an unusually large 1.5% in September for this happen. | |
Economists pointed to the move by the ONS to revise up growth in July from the original reading of 0.3% as a key factor in their forecasts for the third quarter. | |
Andrew Wishart, UK economist at Capital Economics, said that it meant "fears that the economy is already in recession have been banished". | |
He now thinks the economy could grow by 0.4% in the third quarter, more than he had originally expected. | He now thinks the economy could grow by 0.4% in the third quarter, more than he had originally expected. |
'Disappointing' August | |
In August, the economy was dragged lower by a drop in manufacturing when car production was subdued. | In August, the economy was dragged lower by a drop in manufacturing when car production was subdued. |
Only the construction sector expanded during the month. | |
Chris Williamson, chief business economist at IHS Markit, described the contraction in August as "disappointing", with economists having expected zero growth during the month. | |
But, he said, the figures "come on the heels of a stronger than previously thought July, leaving the economy on course to expand in the third quarter, barring any slump in September". | |
Did The Crown save the UK from recession? | |
TV and film production enabled GDP to grow by 0.3% in the three months to August, more than compensating for activity languishing across the board in that month alone. | |
But that is not sufficient reason to cheer. | |
As the Bank of England has highlighted, growth has lost momentum over the past year and the economy is limping rather than flying. | |
Part of this is undoubtedly Brexit related - with business investment suffering amidst the prolonged uncertainty. A failure of firms to spend on factories and machines will have long-reaching implications. This is one reason why economists are pulling down their forecasts for next year too. | |
But it is also unhelpful that growth in some of our biggest trading partners, such as Germany, has run into problems. The bright spot remains job creation - but that too could falter. | |
This sluggishness ignited a mood shift among policymakers. Even those members of the Bank's interest rate panel who previously favoured a rise in the cost of borrowing now think their next move could be a cut - deal or no deal. | |
The question for them, grappling with as much uncertainty as the rest of us, is when. |