UK GDP: growth hits near two-year high, but business investment shrinks - as it happened

Graeme Wearden

from on 2018-11-09 14:11 (#42JV0)

UK GDP expanded by 0.6% in July-September, the best quarterly growth in almost two years, but economists see storm clouds ahead

2.11pm GMT

And finally.... a UK thinktank has predicted that UK growth will slow to 0.4% in the final three months of 2018

The National Institute of Economic and Social Research's latest GDP tracker predicts that the UK economy expanded by 0.4% in August-October, down from the 0.6% growth racked up in the third quarter.

1.31pm GMT

Here's a round-up of how the UK growth figures are being reported:

Britain's economy kept up healthy momentum during the third quarter, but this may prove a high watermark ahead of Brexit, official figures showed on Friday.

Gross domestic product in the three months to September was 0.6 percent higher than in the previous quarter, matching the consensus forecast in a Reuters poll of economists, figures from the Office for National Statistics (ONS) showed.

The UK economy accelerated to its fastest quarterly growth rate in almost two years over the summer but economists warned that with Brexit uncertainties curbing spending, the performance would soon decline.

Economic growth hit its highest pace since 2016 as GDP surged 0.6pc in the third quarter of the year on stronger manufacturing and construction growth.

Annual growth accelerated to 1.5pc, up from 1.2pc three months ago.

The British economy grew by a perky 0.6 per cent in the third quarter, its fastest for two years, but the positive number was soured by a third successive quarter of falling business investment.

The Office for National Statistics said that the growth in total output compared to the second quarter was the fastest performance since the first quarter of 2016, when the economy surged by 0.7 per cent.

12.42pm GMT

Here's our news story on today's growth figures:

12.41pm GMT

Andy Scott, associate director at independent financial risk management consultancy JCRA, also fears the UK is now slowing:

"The latest GDP figures show that the unexpectedly hot and sunny Summer has encouraged consumers to spend more on eating and drinking out, while Sterling weakness has helped to boost trade. By contrast, investment contracted sharply, suggesting that companies are preparing for a weaker economy by scaling back on spending, with implications for GDP growth as well as the labour market.

With a Brexit deal still hanging in the balance, we expect the economy to slow in the current quarter, as businesses and consumers brace themselves for the eventuality that no solution is found for the Irish border issue. The overall picture of the UK economy is however, one of resilience. With unemployment at multi-decade lows and wages accelerating, the robust levels of household spending should continue to act as a buffer against weakening sectors such as manufacturing, preventing the economy from stalling or worse, contracting.

12.07pm GMT

It's official: the government can organise a photo op in a brewery.....

11.45am GMT

Here's the ONS's take on the growth figures:

Today we've released our latest set of #GDP figures for Q3 2018. Commenting on the figures Head of GDP Rob Kent-Smith said: https://t.co/ROsP0NPAsB pic.twitter.com/ALt3kh0oub

11.00am GMT

The UK can claim to have been one of the faster-growing advanced economies this summer.

The eurozone, for example, only expanded by 0.2% in July-September, with Italy not managing any growth at all. Even France, which should have enjoyed its own World Cup boost, only grew by 0.4%.

10.51am GMT

TUC General Secretary Frances O'Grady has called on the government to help stop the "worrying fall" in business investment.

"The government should set up a National Investment Bank to upgrade Britain's infrastructure. This would help raise productivity, giving a boost to growth and wages.

10.37am GMT

Hammond's claim that Britain's economy has 'underlying strength' really doesn't match the steady slide in UK business investment this year.

UK business investment not on a particularly encouraging path, notes Nomura's Jordan Rochester. "Brexit uncertainty is exerting a larger negative influence on business investment as we move closer to a deal/no-deal being confirmed." pic.twitter.com/41odH391XS

Worryingly, third consecutive quarter of drop in business investment (Brexit-related paralysis?) means UK less prepared for thriving in post-Brexit era.

10.20am GMT

The Chancellor of the Exchequer, Philip Hammond, says today's growth figures show the UK economy's underlying strength.

"Today's positive growth of 0.6% is proof of the underlying strength in our economy. We are building an economy that works for everyone with 3.3 million more people in work, lower unemployment in every part of the country, and wages rising at their fastest pace in almost a decade. Now our focus is on locking in this progress and ensuring people's wages can continue to rise.

"That is why my Budget supports hardworking families by cutting taxes for 32 million people, provides more funding for public services - including a record-breaking funding increase for our vital NHS - and invests in our future with more money for transport and digital technology."

10.14am GMT

The CBI also fears that the UK economy is weakening, despite its sparkling summer.

Their principal economist, Alpesh Paleja, says:

"The sun shone on the UK economy over the summer, boosting economic growth relative to the second quarter.

"But as the impact from the warm weather and World Cup fades, we expect subdued growth ahead. Indeed, our surveys for October already paint a picture of weaker momentum.

10.10am GMT

Will Hobbs, head of investment strategy at Barclays Smart Investor, is also concerned that storm clouds are gathering over the UK economy:

"We should not be lulled into a false sense of security by a third-quarter that was propped up by a bounce in consumption.

Incoming private sector confidence surveys tell us very clearly that the sky is darkening a little for the UK as the realities of a hard Brexit start to weigh more visibly on short term private sector decision making.

10.08am GMT

Brexit is clearly to blame for the slide in UK business investment, says analysts at Danke Bank

#UK business investments fell for the third consecutive quarter (for the first time since the financial crisis). 20% of the UK companies think #Brexit is the key source of uncertainty and as many as 50% have postponed investment decisions due to Brexit $EURGBP pic.twitter.com/ibOzya2c1U

10.02am GMT

This pick-up in UK growth won't last, according to Ana Boata, senior economist at Euler Hermes.

She fears that growth could halve in the current quarter:

"The rebound in UK economic growth in Q3 was triggered by a number of temporary factors including contingency planning in light of the uncertainty on the Brexit deal by March 2019.

"We expect GDP growth to fall to 0.2-0.3% in Q4 as tightening financial conditions, weaker consumer confidence and more fragile business profitability take their toll on the UK economy. The drag on growth from the Brexit related uncertainty will remain and will hinder investment opportunities.

10.01am GMT

Here's confirmation that the sun and the soccer helped drive the UK economy in July.

Solar-powered economy grew by 0.6% between July and September - fastest pace since late 2016. Big bounce in July (world cup and sunshine) but "signs of weakness" in September. Households kept spending as business investment fell. What happens next depends on Brexit. pic.twitter.com/RQgiO9exKE

9.54am GMT

Few important things to note about today's GDP figures. First off, on a monthly basis the economy was actually flat in Aug and Sept. Main thing keeping it strong was a) a relatively strong July and base effects rebounding from a weakish Q2 pic.twitter.com/dztAsGElv1

UK GDP up to 0.6% quarter on quarter in July-September - strongest since Q4 2016. But (and it's a big one), a clear slowdown at end of the quarter, suggesting a weak Q4 on the way.

Today's GDP release showed the impact of the slow down in the automotive or car sector as it took 0.11% off GDP growth in September. That was what stopped the Q3 number being 0.7%.

The 2.1% rise in ONS construction output in 2018 Q3 compared with Q2 is a rise of 872 million, primarily driven by a 507 million rise in private housing, offsetting the 162 million fall in commercial output.#ukconstruction. pic.twitter.com/0VPxmQfmk9

U.K. GDP up 0.6 % in three months to September. Construction up after terrible year ago comparable, manufacturing slightly up but services growth slows and business investment drops a huge 1:2%

9.50am GMT

Better news: Britain's exporters helped to drive growth up over the summer.

The ONS says that net trade made the largest positive contribution to GDP growth in the last three months, thanks to a 2.7% rise in exports. Imports were flat.

9.49am GMT

Another blow: business investment fell by 1.2% between Quarter 2 and Quarter 3 2018.

This is the sharpest decline since the first quarter of 2016 and marked the third consecutive quarterly fall - which has not been seen since the global financial crisis, the ONS says.

9.46am GMT

9.45am GMT

On an annual basis, the UK economy grew by 1.5% in July-September.

That's the best result in a year.

9.38am GMT

Oh dear.

Today's GDP report also shows that the UK economy didn't post any growth in September, or in August.

Real GDP growth in Quarter 3 was driven by growth of 0.3% in July 2018, which stemmed from strong retail sales boosted by warm weather and the World Cup, as well as a low base reflecting the weaker start to the year.

Month-on-month growth in real GDP has been flat in both August and September 2018.

NEW: UK GDP growth flatlines for the second month in a row in September

9.35am GMT

Confirmation that the UK economy just racked up its best quarter since the end of 2016:

9.33am GMT

All four sectors of the UK economy - services, industry, construction and agriculture - grew in the last quarter.

The ONS says:

All four sectors of output contributed positively to growth in Quarter 3 2018, with the largest contribution from the services industries at 0.3 percentage points.

9.30am GMT

NEWSFLASH: The UK economy grew by 0.6% in the third quarter of this year.

That's the fastest growth in a calendar quarter since the last three months of 2016.

9.26am GMT

Here we go...

UK Q3 GDP next, expected 0.6% y/y and 0.4% q/q

9.23am GMT

Today's growth figures could be the high point of 2018...

Lloyds on UK GDP pic.twitter.com/vdoOcshasA

9.20am GMT

The prospect of UK growth hitting its highest level since the end of 2016 hasn't cheered the London stock market.

Shares are down across Europe this morning, as the rally following this week's US elections fizzles out. This has knocked 0.7% off the Stoxx 600, which tracks the region's largest companies.

"Just as it looked like the US midterm election results would give a boost to markets around the world, momentum has been quickly lost.

"A falling oil price has troubled investors and shifted their focus back to concerns about a slowdown in global economic growth."

8.49am GMT

The Treasury have tweeted a short (and simple) video clip to explain what GDP means:

New growth stats out today at 9.30am.

But, what is GDP and why does it matter?

Find out in this video pic.twitter.com/XNLXBO1wO1

8.49am GMT

If today's third-quarter GDP report is indeed strong, then July can take much of the credit.

A consumer spending surge helped to drive growth at the start of the last quarter, but it is likely to have faded by the end.

The story for the UK economy in Q3 was a strong start which had fizzled out almost completely by the end of the quarter, indeed monthly GDP and the Index of Services for September are seen at just 0.1% m/m after flat readings in August.

Q3 Business Investment is projected to rebound modestly to 0.2% q/q, which would be an improvement on Q2's -0.7% q/q, but is obviously heavily encumbered by Brexit related uncertainties

8.14am GMT

Good morning.

The good summer weather boosted consumer spending and construction activity.

This first release of quarterly GDP now comes with an expenditure breakdown which we expect to show household consumption and investment being the major contributors to third quarter growth.

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