UK recovery slowed in third quarter

news
25 October 2014

The pace of the UK recovery slowed in the third quarter of the year with manufacturing posting its weakest performance since the start of 2013 official figures showed.

The UK's gross domestic product (GDP) grew as per expectations by 0.7 per cent, the seventh quarter in a row in which it registered an increased which was however lower than the 0.9 per cent in the previous period.

The dominant services sector saw growth held back due to expansion being pegged back sharply and the UK's beleaguered manufacturers seeing a strong performance earlier this year fade away.

The latter sector saw an expansion of only 0.4 per cent, the slowest pace since a 0.1 per cent contraction in the first quarter of 2013, which came ahead of the UK's growth surge that had seen the economy overtake its pre-recession peak.

GDP was now 3.4 per cent ahead of its level at the start of the crisis in 2008, though manufacturing was still 4.1 per cent behind.

Moreover construction was 8.2 per cent short, registering a 0.8 per cent growth in the third quarter.

The services sector, representing three-quarters of output, was 7.2 per cent ahead of the pre-crisis level with its growth slowing to 0.7 per cent in the quarter, down from 1.1 per cent in the previous quarter.

The Independent reported the softer GDP figure was in line with the financial industry's expectations and helped push the pound up around a quarter of a cent against the dollar.

Analysts saw this as a positive development. According to Samuel Tombs of Capital Economics, with easing inflation providing a timely boost to real incomes, firms' employment and investment intentions still strong, and private sector balance sheets in improved health, the recovery seemed unlikely to suddenly stall.

However, some analysts sounded a note of caution warning that the UK economy was still vulnerable to a deterioration in economic conditions in the eurozone, which accounted for close to a half of all UK trade.

They added that if the slowdown continued, the Bank of England would probably be forced to delay its first interest rate rise further into next year.

According to Rob Carnell of ING, if the mixed data continued to roll in, and if the eurozone showed no signs of renewed growth, this could push back rate hikes, perhaps beyond next year's general election.





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