With the ONS estimating that GDP fell by -0.1% in September, growth in the 3rd quarter of the year was just +0.1% – lower than many commentators had expected. It marks a sharp contrast with the first half of the year where UK GDP had grown by +0.7% in Q1 and +0.5% in Q2. In particular, the weakness in September is being blamed on pre-Budget uncertainty.
As with the manufacturing output data, we will concentrate on the quarterly trends but it is worth just mentioning that the fall in monthly GDP in September was due mainly to manufacturing and the information & communication section of the service sector – the latter reflected the gain from some of August’s anomalies unwinding. On the upside, the most significant growth came in retail sales (excluding motor vehicles) and construction.
With the economy flat in July and up by +0.2% in August, the negative trend for September meant that the UK economy only grew by +0.1% in the 3rd quarter of the year. As noted above, this marks a significant change from the relatively strong growth that we saw in the first half of the year and, while weaker than we had expected, it is broadly in-line with the forecasts at our recent seminar.
We have already covered the modest improvement in manufacturing output but it is worth noting that total production declined in Q3 thanks to a relatively sharp fall in output for “electricity, gas, steam & air conditioning supply” and a more modest decline in “water supply; sewerage, waste management & remediation activities”.
The construction sector had a good quarter with output increasing by +0.8% following three periods of decline. This came entirely from new work which grew by +2.0% compared to Q2, while repair & maintenance activity fell by -0.6%; in the former, the main driver was an increase in “infrastructure new work” while the most significant negative came from “private housing repair & maintenance”.
The service sector was a mixed bag of trends, with growth overall of just +0.1% in Q3 (it was +0.6% in Q2). At the high level of aggregation, this was all in consumer-facing services which grew by +0.5%, while the rest of the sector was unchanged. Overall, 8 of the 14 major sub-sectors saw an increase in output in the latest period. The main positives came from “professional, scientific & technical activities” and “wholesale & retail trade” and this was partially offset by negative contributions of a similar size in several other sectors, led by “other service activities” and “financial and insurance activities”.
There are more details in the range of ONS Statistical Bulletins which can be downloaded from their website at https://www.ons.gov.uk/releasecalendar (15 November) or on request from MTA.