UK economy returns to growth in Q3, avoids recession
By Michele Maatouk
Date: Monday 11 Nov 2019
(Sharecast News) - The UK economy avoided falling into a recession in the third quarter, although year-on-year growth was the weakest in nearly a decade, according to figures released by the Office for National Statistics on Monday.
Gross domestic product grew 0.3%, returning to growth following a 0.2% contraction in the second quarter but coming in a little below expectations of 0.4% growth. Two quarters of contraction in a row would have indicated a recession.
On an annual basis, GDP was up 1% in the three months from July to September, down from 1.3% growth in the previous quarter and missing expectations for a 1.1% increase. It marked the slowest rate of quarter-on-year growth since the first quarter of 2010.
An ONS spokesperson said: "GDP grew steadily in the third quarter, mainly thanks to a strong July. Services again led the way with construction also performing well. Manufacturing failed to grow as falls in most industries were offset by car production bouncing back following April shutdowns.
"Looking at the picture over the last year, growth slowed to its lowest rate in almost a decade.
"The underlying trade deficit narrowed, mainly due to growing exports of both goods and services."
Manufacturing production and industrial production both contracted month-on-month. Manufacturing output was down 0.4%, missing expectations for a 0.3% decline, while industrial production fell 0.3% versus forecasts for a 0.2% drop.
David Cheetham, chief market analyst at XTB, said: "While the positive GDP reading means that the UK has managed to stave off a recession for another year there is little doubt that the economy is spluttering, with political uncertainty and a slowdown in global activity clearly taking their toll."
Ruth Gregory, senior UK economist at Capital Economics, said: "While the economy avoided a recession in Q3, it's pretty clear that the economy is pretty soft. The GDP figures suggest that the economy failed to regain much momentum after Q2's 0.2% quarter-on-quarter contraction. Indeed, the 0.3% q/q rise in GDP in Q3 was lower than the consensus and the Bank of England forecasts of 0.4% and only just above the eurozone's 0.2% quarterly gain.
"With the election just under five weeks away, clearly this isn't the good news the government might have hoped for. And further weakness is likely to be in store in Q4 - we have pencilled in a 0.2% q/q rise. Unless Brexit uncertainty fades and a fiscal boost is forthcoming, then this might make the Bank of England more inclined to cut interest rates before long."
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "All told, GDP undeniably is growing at a slightly below-trend rate this year, but the case for the MPC to cut Bank Rate remains weak, now that the downside risk to the economy posed by a no-deal Brexit has faded and fiscal stimulus is coming next year."
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