GDP growth slows more than expected

The service sector, the biggest part of the economy, grew by 0.7% but output in the manufacturing sector declined by 0.3%. That was slightly worse than market expectations for 0.6-percent quarter on quarter expansion, and followed growth of 0.7 percent in April through June. “But the current strength of the pound points to a deepening of the recession in the manufacturing sector, which is twice the construction sector’s size”. United Kingdom continues to outperform other major economies.

But taken at face value the latest figures amount to the first quarter on quarter fall in construction output for two and a half years.

Indeed, it appears unlikely these fresh figures will ruffle rate-setters at the Bank of England, who have so far shrugged off global fears and signaled borrowing costs could rise early next year.

According to the ONS, the decline in construction is partially attributed to harsh weather conditions in August, while national manufacturing is losing competitiveness due to both the sterling’s appreciation and the emerging markets’ financial instability.

Once again it was the UK’s buoyant services sector which propped up broader economic growth, with output rising 0.7% over the quarter.

The news will ease pressure on the Bank of England to raise interest rates.

Year-on-year, the economy grew by 2.3%, not the expected 2.4%.

‘We continue to forecast no change in interest rates until May 2016. The ONS said this fall was offset by a 2.4% increase in mining and quarrying and a 1.2% increase in water and waste management.

Responding to the figures, Mr Osborne warned there were more “tough decisions” required to keep the economy on track.

‘The breakdown of growth will likely reinforce concern that United Kingdom growth remains too reliant on the services sector and consumer spending, ‘ said Howard Archer, chief European and United Kingdom economist at Markit.

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

Compared with the same quarter past year, GDP is 2.3% higher between July and September.

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. “However, the global outlook is undoubtedly darker and this could act as a brake on growth over the next few quarters”, he adds.