UK GDP: Economy avoids recession despite weakest growth in a decade – as it happened

Graeme Wearden

from Economics | The Guardian on 2019-11-11 16:36 (#4TZ57)

Britain's economy grew by 0.3% in the last quarter, after shrinking in Q2, but annual growth slowed to just 1%

Latest: UK economy grew 0.3% in the last quarter
But annual growth is weakest since 2010
Service sector grows, but manufacturing stagnates
Moody's has threatened to downgrade UK credit rating

4.36pm GMT

Finally, the FTSE 100 index of top UK shares has closed 30 points lower at 7,328.

Multinationals and major exporters were hit by the strengthening pound, although banks and house builders held onto their gains.

4.33pm GMT

Construction was one of the bright spots in the UK economy in the last quarter, growing by 0.6%.

But economic uncertainty threatens to pull the sector back again.

"These latest figures reflect the uncertainty the sector is currently experiencing.

They show an increase in new work over July to September, and in particular higher than expected increases in housing, commercial and industrial new work, but a slowdown in September itself.

4.27pm GMT

Business owners from construction, manufacturing and TV have told us how they're coping through the slowdown:

3.18pm GMT

Shares in UK banks and housebuilders are rallying in London, as fears of a hung parliament recede a little.

Royal Bank of Scotland and Lloyds Banking Group have both gained over 4%, as have building firms Persimmon and Barratt Development.

"All eyes must now be on the Liberal Democrats. Will Farage's move incite a mirror image reaction from the Liberal Democrats, potentially stepping aside in order to increase Labour's chances and "take the fight" back to the Conservatives? As we approach the December 12 elections, investors should anticipate conflicting headlines, with currency moves perhaps disproportionate to the overall impact.

Sterling is now at the whim of headline risk which, as Christmas approaches, waning market liquidity will exacerbate."

3.07pm GMT

Back on GDP.... Chris Giles of the Financial Times has done some impressive number crunching, to prove a couple of important points.

1) The growth rate of the UK economy has been slowing, slowly but steadily, over the last seventy years.

ai SOME ECONOMIC CONTEXT ai

UK economic growth rates are historically low at the moment

Decline has been reasonably consistent since WWII

(which means you need to be careful with time comparisons)

1/ pic.twitter.com/kWToev5cls

ADDENDUM - Some have asked for a reference for other countries

- This is not altogether easy (here is a proxy such as the average of the US and France to reflect other G7 countries)

- shows UK underperformance until *coughs* UK joins the EU.
- Then better, now worse pic.twitter.com/F2N6AHaZm3

2.55pm GMT

Over in New York, stocks have opened lower.

The Dow Jones industrial average has dropped by 139 points, or 0.5%, to 27,541. Trade war jitters are pulling Wall Street away from last Friday's record closing high.

2.48pm GMT

Jingye has issued a statement, saying it plans to invest 1.2bn in British Steel over the next decade.

It also promised to make job offers to "as many employees as possible" across the group....

2.22pm GMT

Newsflash: British Steel has been saved from closure, after a Chinese industrial giant agreed to buy the company's assets.

The Official Receiver and Special Managers from EY can confirm that a sales contract has been entered into with Jingye Steel (UK) Ltd and Jingye Steel (UK) Holding Ltd (together, Jingye), to acquire the business and assets of British Steel Limited (BSL), including the steelworks at Scunthorpe, UK mills and shares of FN Steel BV, British Steel France Rail SAS and TSP Engineering.

The sale also includes the shares owned by BSL in Redcar Bulk Terminal Limited.

2.13pm GMT

Britain's growth was even slower once you adjust for population increases.

This chart shows how growth on a per capita basis has been weak in recent quarter (data here).

The big question today is not whether GDP has grown over the passed few months.

The real question is why, after adjusting for the actual costs faced by families, gross incomes per person are still lower today than they were in 2008.

More here @NEF: https://t.co/OHOKKlecdS https://t.co/wxdtFjs196 pic.twitter.com/EDhnA0yiKG

1.49pm GMT

Sajid Javid is correct when he says that Britain is expected to grow faster than Japan, Italy and Germany in 2019 and 2020.

But that's hardly impressive. Italy has been stagnating for years, Germany will probably tumble into recession on Thursday, and Japan's export-driven economy has been hurt by the US-China trade war.

1.24pm GMT

UK chancellor Sajid Javid has insisted that the UK economy is in good shape, despite annual growth slowing to a nine-year low.

Over the last nine years since the Conservatives have been back in office we've seen nine consecutive years of growth.

These are all good signs of the fundamental strength of the economy.

We are doing better than many of our competitors....

Here at home there are factors at play, and the number one issue is around uncertainty, around Brexit.

12.58pm GMT

Here's my colleague Phillip Inman on today's growth figures:

The British economy has avoided recession after officials figures showed it grew 0.3% in the third quarter of the year.

The GDP data for July to September from the Office for National Statistics showed the UK returned to growth after a dip of 0.2% between April and June. A technical recession is defined by two successive quarters of negative growth.

12.47pm GMT

Nigel Farage's decision not to run Brexit candidates in Conservative constituencies has also lifted the pound to a six-month high against the euro, at a1.168.

The pound is stronger since a clear, decisive election win for the Conservatives will provide clarity on Brexit - anything else becomes messy.

This is a big boost to the Conservative Party as the Brexit Party had talked about fielding 600 candidates. It changes the electoral map. Mr Farage seems to have been persuaded by Boris Johnson's commitment not to extend the transition period beyond December 2020. Mr Farage and everyone else knew it would have been crazy politics for the Brexit Party to take Leave votes away from the Tories and enable a pro-Remain grouping to take seats.

12.34pm GMT

Back in the City, the pound has just jumped to a one-week high.

Sterling had already been lifted by the news that Britain had avoided recession.

12.10pm GMT

Worryingly, business investment has fizzled out in the last couple of year.s

The ONS reports that it was flat in the last quarter alone, but has shrunk in five of the last eight quarters:

11.44am GMT

Britain's economy is now paying the price of years of austerity, argues TUC General Secretary Frances O'Grady:

"A decade of cuts and under-investment has slammed the handbrake on economic growth.

"When Britain needed rebuilding after the crash the Conservatives opted for austerity and tax breaks for big business.

GDP growth, third quarter (%)

2015 2.2
2016 1.9
2017 1.8
2018 1.6
2019 1.0

The UK economy is only going one way.

And when that happens, it's working people who pay the price.

11.26am GMT

Britain's economy benefited from a boom in UK-based film and TV production in the last quarter, the ONS says.

That helped the wider information and communication industry to grow by 0.8% in the last quarter, nearly three times faster than the wider economy.

Two bright areas of today's GDP numbers - computing and creative industries (telly, music and film). Yet how much Labour/Tory infrastructure spending will go into these economy building sectors? Nowt.

11.12am GMT

Kallum Pickering of German bank Berenberg has crunched today's GDP data, to show that UK growth has fallen steadily since the EU referendum

Intensifying Brexit uncertainties over the last three years have gradually eroded the UK's underlying growth momentum. After averaging 0.6% in 2015, the average quarterly pace of growth has slowed each year since then. Down from 0.38% in 2018, the quarterly pace has slowed to 0.22% for the first three quarters of 2019 - barely half of the UK's potential rate (c0.4%).

The slowdown highlights the pains of political uncertainties linked to Brexit and the upcoming general election on 12 December.

10.56am GMT

Today's GDP report shows that private consumption, government spending and net trade all made a positive contribution to growth.

But 'gross fixed capital formation' (a broad measure of investment) contracted in Q3, and manufacturing has also shrunk over the last six months.

Latest GDP figures show UK economy has almost ground to a halt. GDP up just 0.1 pc over the past 2 quarters. UK economy becoming even more unbalanced - consumer spending, gov't expenditure & services output are growing while manufacturing industry and investment are in decline.

10.49am GMT

John McDonnell, Labour's Shadow Chancellor, isn't impressed that the UK economy has barely grown over the last six months:

"Over the last year, growth slowed to its lowest rate in almost a decade.

"The fact that the Government will be celebrating 0.1% growth in the last six months is a sign of how low their hopes and expectations for our economy are.

10.45am GMT

This chart shows how Britain's annual growth rate has slumped to a nine-year low (the blue line) despite growth picking up in the last quarter (the red bars).

10.17am GMT

Economist Simon French of City firm Pantheon is also concerned that growth fell in August and September, after a punchy July (+0.3%).

Good news that UK #GDP grew again in Q3 (+0.3% QoQ; +1.0% YoY). A word of caution: after the July surge in output, August and September were weaker. As such Q4 growth is set to remain modest as further political uncertainty chills forward-looking spending decisions /1 pic.twitter.com/y7Cxw0ghQk

So the UK has skirted a technical recession q3 0.3% vs -0.2% in q2. Slowest YoY growth in 9 years tho

Investment and Manufacturing continue to drag $GBP

10.14am GMT

Avoiding recession is obviously welcome news.

But the broader picture is that the UK economy is struggling along. With growth at a nine-year low, few experts are celebrating.

The UK economy has been in stop-start mode all year, with growth punctuated by the various Brexit deadlines. Indeed, the pick-up in the third quarter numbers may slightly exaggerate the strength in the economy, with some activity likely to have been brought forward before October 31st. The final quarter of 2019 could be weaker as stockpiles continue to be run down.

"While high employment has provided some support for the economy, underlying weaknesses in investment and productivity still need addressing. With uncertainty likely to persist and a continued slowdown in global markets, the onus is on the new government to stimulate economic activity and move the UK beyond its current yo-yo pattern of growth."

Household spending remains the main motor of growth, with a 0.4% rise in the third quarter bolstered by stronger earnings growth.

By contrast, business investment was flat, reflecting the continued drag from Brexit-related uncertainty, which looks set to continue into the fourth quarter."

The stronger headline figure masks an alarming loss of momentum through the quarter from a relatively strong July outturn and therefore does little to suggest any meaningful improvement in UK's underlying growth trajectory.....

Despite the pick-up in growth, a slowing global economy has weakened firms' cashflow, disrupted supply chains and stifled investment and is likely to squeeze economic activity in the fourth quarter and beyond, unless action is taken.

10.04am GMT

Alarmingly, most sectors of UK manufacturing have contracted over the last six months.

As the chart shows, car production slumped in the second quarter because auto plants brought their annual shutdowns forward to April, in case of a hard Brexit. That meant the production bounced back in the summer.

Manufacturing failed to grow in Quarter 3 2019, with falls in many industries almost solely offset by an increase in the manufacturing output of transport equipment.

This recovery in car production follows a decline in Quarter 2, because of partial closures of various car manufacturing plants.

9.54am GMT

The Office for National Statistics has tweeted the key points from today's GDP report, including the fact that annual growth has hit a near-decade low:

GDP grew 1.0% in Q3 2019 compared with Q3 2018 https://t.co/DFuxMAiDus pic.twitter.com/AyHkaJn12V

Commenting on today's GDP figures for Q3, an ONS spokesperson said: https://t.co/eDWp8tPUB7 pic.twitter.com/gWDlyl9ab3

Our spokesperson continued: https://t.co/0WMykWUTbu pic.twitter.com/N9JUoNY2ro

9.48am GMT

On an annual growth basis, the UK economy is dragging its feet behind the US and France - but ahead of Italy:

UK GDP up 1%y/y in Q3 2019. Not many OECD countries have reported, but UK %y/y growth currently 3rd out of the four G7 nations that have (US 2%y/y, France 1.3%y/y & Italy 0.3%y/y). pic.twitter.com/FnVp5Nd1Mi

9.45am GMT

9.42am GMT

Britain's service sector provided the bulk of the growth in the last quarter, growing by 0.4% in July-September.

The construction sector grew by 0.6%, as building activity picked up.

Production was flat in the three months to September 2019; this sector has not seen positive rolling three-month growth since April 2019. Manufacturing, the largest sub-sector of production, was also flat in the three months to September 2019.

9.35am GMT

Although the UK has avoided recession, the economy is still looking weak.

On an annual basis, UK GDP only rose by 1.0% in July-September compared with Q3 2018.

9.33am GMT

The economy did shrink in September, by 0.1%.

But strong growth in July means the economy expanded in the third quarter of the year.

9.30am GMT

NEWSFLASH: Britain has avoided recession.

The UK economy expanded by 0.3% in the third quarter of the year, the Office for National Statistics says.

9.25am GMT

Not long to wait.....

Stand By Your Desks! UK Q3 GDP is up next and the Bank of England thinks it will be 0.4% so fingers crossed!

9.20am GMT

UK chancellor Sajid Javid will be quizzed about the state of the economy by the BBC's Faisal Islam:

Heading to interview Chancellor after GDP figure release...

Expectation is that in Q3 (July-Sep) economy grew by about 0.4, therefore avoiding technical recession after -0.2 in Q2. But overall picture so far in 2019 sluggish... due to global trade/ Brexit/ low investment...

If negative (unlikely given monthly data) that's a recession.

0.5 or under (assuming no revision to q2) would still be slowest two quarters since financial crisis 2009

Data has been bouncing around q a bit because of two rounds of ultimately unnecessary no deal stockpiling...

9.19am GMT

UK data due at the bottom of the hour the only real economic releases of the day of note. 1st look at Q3 GDP +0.4% exp vs -0.2% prior. Industrial and manufacturing production could give a better read on current state of activity. GBP little changed despite Moody's donwgrade

9.06am GMT

Bakery chain Greggs isn't weighed down by recession worries.

8.51am GMT

The UK was actually the worst-performing EU economy in the second quarter of 2019.

A 0.2% contraction put it at the bottom of the growth league, behind Germany and Sweden (which shrank by 0.1%).

8.38am GMT

In the City, the FTSE 100 index of top blue-chip shares has dropped by 0.5% in early trading.

It's down 37 points at 7322, a one-week low.

Breaking: Credit ratings agency Moody's changes outlook on UK's (Aa2) rating from stable to negative. Pretty damning release says Brexit has been a catalyst in an "erosion in institutional strength" which is now seriously undermining faith in the UK. More here: pic.twitter.com/j55TRhwVjp

8.30am GMT

Bloomberg also reckons the UK's economy has lost momentum due to the ongoing Brexit crisis, saying:

The U.K. almost certainly avoided a recession ahead of the now-postponed October 31 deadline to leave the European Union. The economy expanded 0.4% between July and September, thereby avoiding a second straight quarter of contraction, according to the median forecast in a Bloomberg survey.

Brexit stockpiling has led to volatility in output this year but the underlying picture is one of an economy that has lost momentum amid the turmoil convulsing British politics.

8.12am GMT

Several economists believe that Britain's service sector drove the economy back into growth.

Here's Suren Thiru, head of economics at the British Chambers of Commerce:

#UK #GDP data out today at 9:30am likely to show that the UK avoided recession with the latest @britishchambers QES indicating GDP growth of around 0.3% in Q3 2019 (driven mainly by the services sector). pic.twitter.com/C1GGBvk36o

The rebound is largely expected to have been driven by the services sector, which makes up almost 80% of the UK economy and tends to do all the heavy lifting in most cases.

The services sector is expected to contribute 0.4% of growth in Q3, with private consumption also contributing to a healthy rebound.

Even if GDP fell 0.1% month-on-month in September, third-quarter GDP quarterly growth will have been 0.4% quarter-on-quarter. Reasonable consumer spending growth, healthy tourism and positive contributions from government spending and investment were probably behind the economy's growth in the third quarter.

It also looks likely there was some, albeit limited stockbuilding in September ahead of the scheduled 31 October Brexit due date.

7.57am GMT

The Daily Express has taken something of a flyer on this morning's GDP figures.

Their front page says there is a "Boris Boost as Economy Bounces Back", even though we don't actually have the growth data yet.

BORIS JOHNSON'S election hopes have been majorly boosted as the latest financial data will show the UK economy growing once again after a previous quarter of contraction.

0.4 is what most people expect.

Only shows "economy firing on all cylinders" if the UK is happy to be downgraded to a Reliant Robin

Politicians happy with this number will be disappointed by the lack of tax revenues it would bring over the next 5 years pic.twitter.com/C9cAWwa0N7

7.43am GMT

Good morning. We're about to learn whether the UK has plunged into its first recession since the financial crisis.

It's UK GDP day - here's what to expect https://t.co/P7s8UICVLE via @economics #tictocnews pic.twitter.com/z79nu3BKWJ

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