Q3 UK Growth Best Since 2016
The UK economy posted quarterly growth of 0.6% for Q3 2018, making it the best quarterly growth seen since Q4 2016 – or put another way, its best performance since the UK voted for Brexit.
The Office for National Statistics (ONS) reading is in line with projections from the Bank of England, but a closer analysis shows that the good performance seen at the outset of the quarter (July) was not matched in the subsequent two months. It is speculated that the very warm summer experienced this year helped to boost the figures, inducing consumers to spend more.
Given that growth slowed in August and September to no growth at all, analysts are expecting the Q3 growth figure to be a one-off. The service sector which is the dominant term in the UK economy, accounting for roughly 80% of output, managed growth of just 0.3% in the quarter. Construction managed impressive Q3 growth of 2.1%, helped by the good weather, no doubt. Car manufacturing output picked up somewhat in Q3, contributing to a minor manufacturing growth surge. Household consumption picked up by 0.5% in the quarter, but the 1.2% decline in investment is a cause of concern. Analysts had been predicting that inwards investment would post modest growth of 0.2%, but the decline means that investment has posted three successive quarters of falling figures. Buccaneering, global trading Britain would not seem to be a tempting offer to investors, Mr Johnson!
Domestic car sales remain weak and whilst production grew with respect to Q2 it was down in Q3 on a year-on-year basis. The expansion seen in Q3 is largely thanks to exports, something threatened by Brexit if just-in-time production is damaged by loss of frictionless trading or the imposition of tariffs under a WTO no deal scenario.
Summing up the data, Rob Kent-Smith, ONS’s head of national accounts, noted: "The economy saw a strong summer, although longer-term economic growth remained subdued. There are some signs of weakness in September, with slowing retail sales and a fallback in domestic car purchases. However, car manufacture for export grew across the quarter, boosting factory output. Meanwhile, imports of cars dropped substantially, helping to improve Britain's trade balance.”
The average quarterly growth achieved by the UK is 0.6% between 1955 and 2018 with an all-time high of 5% (Q1 1973) and a record contraction of 2.7% (Q1 1974).