GDP: Summer spending pushes UK economy growth spurt of 1.3 per cent
The UK economy grew by 1.3 per cent between July and September, down from 5.5 per cent in the previous three months, the Office for National Statistics (ONS) has said.
The quarterly figure has fallen below analyst estimates of 1.5 per cent. The UK’s GDP remains just 0.6 per cent below its pre-pandemic levels after jumping 0.6 per cent in September, according to preliminary figures from the ONS.
Shane O’Neill, head of interest rate trading for Validus Risk Management, said the lower-than-expected print will not only give the Bank of England “cause for concern” but also “partly justify their decision to not hike rates earlier this month. This print will leave the market unsure about the chances of a rate hike in December and will likely weigh on front-end rates and GBP”.
Monthly GDP collapsed in April 2020 amid a raft of emergency pandemic measures which saw businesses close their doors and consumers remain homebound.
The latest GDP figures follows a 0.2 per cent dip in July and some 0.2 per cent of growth in August of this year.
Chancellor Rishi Sunak said: “As the world reopens we know that there are still challenges to overcome.
“We’re continuing to support businesses, jobs and people so that we can achieve our vision of a high-skill, high-productivity economy where work is rewarded.”
Despite global raw material inflation, construction activity grew 1.3 per cent in September, following two months of contraction.
With the majority of pandemic restrictions having been eased that month, services increased by 0.7 per cent. However, consumer-facing services output slipped 0.6 per cent, which had been pushed by a dive in wholesale and retail trade in the period.
The rush to complete works and deals before the end of the stamp duty holiday helped drive more than two per cent worth of growth in professional, scientific, and technical activities – which was the second largest contributor to September’s growth in services.
Head of economic research at trade credit insurer Euler Hermes, Ana Boata said: “UK exporters face a difficult winter ahead as supply disruption shows little sign of easing, with profits squeezed as a result. Indeed, supply chains will remain under pressure until mid-2022 with the immediate challenges expected to nudge the British manufacturing sector into a recession in this quarter. Those in the automotive, machinery and equipment, and chemicals industries are particularly exposed to a shortage-induced industrial recession and export performance would continue to be hurt as a result.
“Looking ahead to 2022, we expect the ongoing mismatch in the labour market and supply chain disruptions to keep inflation above 4 per cent in H1 2022 which will continue to put pressure on the ability of businesses to increase their pricing power and protect their margins, especially in an environment of significantly less state support and a start of fiscal consolidation bringing softer demand.”