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| UK economic growth slows to 0.7% | UK economic growth slows to 0.7% |
| (about 2 hours later) | |
| The UK economy grew at a slower pace in the third quarter but was still up a solid 0.7%, more than most other advanced economies. | The UK economy grew at a slower pace in the third quarter but was still up a solid 0.7%, more than most other advanced economies. |
| The slowdown from growth of 0.9% in the second quarter was in line with most forecasts. But after recent economic indicators showing a weaker housing market, and slower manufacturing and consumer spending, some had feared growth could be weaker. Relief in financial markets at the figures, which confirmed seven consecutive quarters of growth, gave the pound a boost in morning trading. | |
| “While today’s figures show that growth in the third quarter was modestly lower than in the second quarter, we do not consider that the recovery is losing serious momentum,” said Philip Shaw, economist at Investec. | |
| The Office for National Statistics said growth in output from the UK’s dominant services sector slowed from July to September and that manufacturing grew at the slowest pace for 18 months. | The Office for National Statistics said growth in output from the UK’s dominant services sector slowed from July to September and that manufacturing grew at the slowest pace for 18 months. |
| Services remained far and away the biggest driver of growth, followed by production, which includes manufacturing. Construction growth picked up in the third quarter, chiming with reports that housebuilding is at its strongest since 2007. | |
| Compared with a year ago, GDP was up 3%, down from annual growth of 3.2% in the second quarter. | Compared with a year ago, GDP was up 3%, down from annual growth of 3.2% in the second quarter. |
| The solid growth figure is not all good news, however, after it emerged that Britain has been told it must pay an extra €2.1bn (£1.7bn) into the European Union budget by the end of next month because it is performing better than its European neighbours. | The solid growth figure is not all good news, however, after it emerged that Britain has been told it must pay an extra €2.1bn (£1.7bn) into the European Union budget by the end of next month because it is performing better than its European neighbours. |
| Rob Carnell, economist at ING Financial Markets, said the performance was “very respectable”, though he added: “The UK chancellor may view this as a mixed blessing, after being given a bigger bill for the EU budget thanks to the UK’s relative outperformance of its European Union peers. | Rob Carnell, economist at ING Financial Markets, said the performance was “very respectable”, though he added: “The UK chancellor may view this as a mixed blessing, after being given a bigger bill for the EU budget thanks to the UK’s relative outperformance of its European Union peers. |
| “This will be especially irksome since despite the stronger growth figures, there has not yet been an accompanying improvement in the UK public finances to match.” | “This will be especially irksome since despite the stronger growth figures, there has not yet been an accompanying improvement in the UK public finances to match.” |
| The Treasury welcomed the latest figures but was quick to point to pressures from outside the UK weighing on business activity. | |
| Chancellor George Osborne said: “Today’s strong growth figures show that the UK continues to lead the pack in an increasingly uncertain global economy. With all the main sectors of the economy growing it’s clear that our recovery is broadly based. | |
| “But the UK is not immune to weakness in the euro area and instability in global markets, so we face a critical moment for our economy.” | |
| Business groups have also warned that manufacturers in particular are feeling the strains in the eurozone, where some economies are contracting and others are grappling with deflation. | |
| The CBI said this week that falling demand for British goods abroad weighed on manufacturers in October. A stronger pound also dented UK competitiveness and export orders dropped for the first time in 18 months. | |
| The manufacturers’ organisation EEF said the sector was still on track to grow at its fastest pace since 2010 and domestic demand remained healthy. | |
| However, EEF senior economist Felicity Burch said: “Today’s estimates confirm the economy has slowed, with little surprise that export-intensive sectors have been most affected. After strong growth in the first six months of the year, the pace of growth in manufacturing has also slackened as a result of weaker demand from key markets including Europe and China.” | |
| Taken as a whole the UK’s economy is now 3.4% above its pre-crisis peak in the first quarter of 2008. But in a blow to the government’s ambitions to secure more balanced growth, it is only the services sector that has exceeded its pre-crisis peak. Manufacturing and construction still have some way to go to make up lost ground, the ONS confirmed today. | |
| “Although there has been widespread growth across all major components of GDP since the start of 2013, the service industries remain the largest and steadiest contributor to economic growth, and the only component of GDP where output has exceeded its pre-downturn peak,” statisticians said. | |
| The economy also remains below its pre-crisis level when measured by head of population. | |
| John Hawksworth, chief economist at PwC points out that while total GDP is now around 3.4% higher than its pre-recession peak, the population has also grown by around 4.5% over the same period. | |
| “Average GDP per person is therefore still around 1% lower in real terms than before the recession, which helps to explain why many people may feel that there is some way to go before the downturn is truly over,” he said. |