The government of the UK will be breathing a collective sigh of relief that the UK economy has avoided a recession in Q3 as it prepares to fight the general election. However, growth in Q3 was anything but robust, returning the weakest performance for a decade. According to the Office for National Statistics, Q3 growth in the UK came in at 0.3%.
Taken as a year-on-year figure, growth from slowed from 1.3% for the year ended in Q2 to 1% for the year ended in Q3. The quarterly figure itself saw slower growth than the Bank of England had been predicting; 0.3% instead of 0.4%, but at least the economy grew in comparison to the previous quarter which saw a contraction of 0.2%. However, a month-by-month analysis of the quarter shows that growth fell in both August and September (revised figure of 0.1% for August and a provisional 0.1% contraction in September) with only the “relatively” good growth figure of 0.3% in July saving the government’s blushes for the full Q3 data. It may be suggestive that a further contraction of the economy is on the cards for Q4.
Taken as a whole, Q3 saw the service sector and construction doing (relatively) well, but manufacturing remained flat, despite some recovery in car production. Growth in the construction sector was te first positive rolling 3-month gain seen since May, but manufacturing output has remained essentially flat since April, on this basis.
The obvious elephant in the room continues to be the economic uncertainty caused by a Brexit direction which remains in flux. Whilst the Conservative Party continues to lead in the opinion polls, predictions run anywhere from a further hung parliament (potentially with the Tories in opposition) to a majority Johnson administration with enough votes to push his Brexit deal through. Despite the government campaigning on a “get Brexit done” ticket, a decision to endorse leaving the EU would be the beginning of a lengthy period of trade negotiations. A recent pledge by Johnson not to extend the transitional period is seen by many observes to make a “no deal” exit a racing certainty at the end of next year.