UK Economy Loses Steam in Third Quarter

The nation’s powerhouse services sector grew by a solid 0.7 per cent, but this was partially offset by a 2.2-per cent drop in construction output.

In comparison, the economy grew 0.7% between April and June and it falls below the 0.6% figure predicted by market experts. However, within production, manufacturing fell by 0.3%. Construction figures, which have looked bleak for months, are also prone to upward revisions.

Mr Morton, who heads up Franklin Templeton’s investment teams in Leeds, told The Yorkshire Post that the United Kingdom economy is unlikely to see a boost in the coming months.

“The slowdown in United Kingdom growth is by no means a disaster, but it will put pressure on the Bank of England to delay the first rate hike, especially as inflation remains in negative territory”, said Schroders economist Azad Zangana.

The construction sector fell by 2.2% – its biggest quarterly fall in three years – with unusually wet weather in August likely to have played a role.

In records from their October policy meeting, BoE officials said a slower expansion of United Kingdom activity in the third quarter was “a natural effect of the economy approaching a balance” after recovering from the financial crisis.

On the year, GDP unexpectedly eased to 2.3% from 2.4%.

Manufacturing output dropped by 0.3 per cent on the quarter and has contracted for three quarters in a row, but overall industrial output was supported by growth in oil production due to fewer maintenance shutdowns than in previous years. Samuel Tombs, an economist at Pantheon Macroeconomics in London, said the economy is nearly entirely dependent on services and the latest quarter is the “start of a pronounced slowdown”. But the fourth main sector, construction, saw a decrease in output of 2.2 percent.

Chancellor George Osborne said the United Kingdom continued to outperform other major economies but that “global risks mean we go on with tough decisions to live within our means”.

‘We are still seeing a “Stroll of the Shoppers” more than a “March of the Makers”.

The report is the first of three estimates from the ONS and may be revised, as it’s based on about 44 percent of the information that will ultimately be available.

The recovery is undoubtedly weighted towards consumption, and there’s a serious question over whether that can continue to produce decent growth for years to come.