The UK economy expanded at a slower pace in the third quarter on negative contribution from net trade and the recent supply chain challenges, the Office for National Statistics said Thursday.
Gross domestic product grew 1.3 percent sequentially in the third quarter, but weaker than the 5.5 percent expansion seen in the previous quarter and the economists’ forecast of 1.5 percent. Nonetheless, this was the second consecutive quarterly growth.
The largest contributors to the increase were from hospitality, arts and recreation and health following the further easing of restrictions and reopening of the economy.
The level of GDP was 2.1 percent below where it was before the coronavirus pandemic at the end of 2019.
On a monthly basis, GDP growth improved to 0.6 percent from revised 0.2 percent in August. The rate also exceeded the economists’ forecast of 0.4 percent.
Industrial output grew 0.8 percent in the third quarter driven by the 26.3 percent increase in mining and quarrying. The expansion in mining reflects the reopening of sites that had previously been temporarily closed for planned maintenance.
At the same time, there was a 0.3 percent decline in manufacturing output. The manufacture of motor vehicles decreased 8.2 percent in September, the largest fall since last May.
Construction output fell 1.5 percent in the third quarter, after four consecutive quarterly increases. Services output grew 1.6 percent, after expanding 6.5 percent in the second quarter.
On the expenditure-side, household consumption grew 2 percent following the continued easing of coronavirus restrictions. Underpinned by increases in health, government spending was up 0.9 percent.
Gross fixed capital formation grew 0.8 percent and government investment was up 4.3 percent. There was a moderate 0.4 percent increase in business investment.
The underlying change in inventories was a fall of GBP 2.2 billion in the third quarter. Data showed that the UK’s trade balance fell to a deficit of -1.2 percent of GDP in the third quarter.
Paul Dales, an economist at Capital Economics, said the shortages and the hit to the real spending power of businesses and households from higher taxes and rising utility prices will mean that GDP growth is sluggish over the next six to nine months.
This probably will not prevent interest rates from rising, with the first hike from +0.10 percent to 0.25 percent perhaps coming in December, the economist noted.
However, it will contribute to rates going no higher than 0.50 percent next year.
In a separate communiqué, the ONS said the visible trade deficit widened to GBP 14.7 billion in September from GBP 13.7 billion in August. Exports were up 1.9 percent, while imports rebounded 3.8 percent.
The overall trade balance showed a deficit of GBP 2.77 billion versus a GBP 1.88 billion shortfall in August.
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