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The UK economy barely grew in the third quarter as the dominant services sector lost momentum, underscoring the challenge the Labor government faces in putting growth at the heart of its agenda. me.
the economy The Office for National Statistics said on Friday that growth was 0.1% in the quarter, compared with a 0.5% rise in the second quarter. This figure is lower than economists’ expectations of 0.2%.
The services sector, which accounts for about 80% of the economy, grew 0.1%, eclipsing the 0.8% growth of the construction sector.
In a sign of weakening growth momentum over the three-month period, the economy shrank 0.1% in September, largely due to falling manufacturing output.
In the Budget late last month, chancellor Rachel Reeves increased taxes and borrowing in what Labor said was an attempt to repair public finances and improve public services. However, many businesses believe that increasing employer national insurance contributions will hit job creation and could cause companies to scale back their investment plans.
After releasing the data on Friday, Reeves said: “Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers.” .
The British pound was little changed at $1.2680 after the data was released.
Suren Thiru, director of economics at the Institute of Chartered Accountants in England and Wales, said the third quarter figures “paint a more realistic picture of the UK’s underlying growth trajectory in the face of long-term challenges.” long period of poor productivity and persistent supply-side constraints.”
According to the UK Quarterly GDP the figure for the three months to September compares with growth of 0.7% in the US and 0.4% in the euro zone.
“Growth tapered off in the third quarter,” said Scott Gardner, investment strategist at Nutmeg, a digital asset manager owned by JPMorgan.
Surveys show consumer confidence has fallen in the run-up to the October Budget as consumers anticipate tax increases. However, Friday’s ONS data showed consumer spending rose 0.5% in the third quarter, up from 0.2% in the second quarter. Business investment also increased 1.2%.
The Bank of England expects growth to continue to be lackluster in the final quarter of the year and forecasts growth of 0.3%. It had predicted 0.2% growth in the second quarter.
Earlier this month, BoE cut interest rates to 4.75% but pointed out that a further reduction in borrowing costs is unlikely before early next year, as it weighs on the inflation outlook.
Easing price pressures helped household spending pick up in the first quarter of the year, helping the economy recover from a technical recession by the end of 2023.
