UK economy grows at fastest rate since late 2016

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The UK economy grew by 0.6percent in the three months to September, with warm weather boosting consumer spending, the Office for National Statistics said.

The figure for the third quarter is in line with predictions from the Bank of England and other forecasters.

However, buoyant growth in July was offset by a slowdown in August and September.

It is the highest quarterly growth figure since the fourth quarter of 2016, when the economy grew 0.7 percent.

Analysts warned the economy had “little underlying momentum” and growth would decline in the final three months.

The ONS also issued a separate monthly figure for September, which, like the previous month, showed zero growth.

Services, which make up three-quarters of the economy, only grew by 0.3 percent  in the three months to September.

After a slow start to the year, construction activity grew by 2.1 percent  in the quarter. Manufacturing also picked up after a slow second quarter, thanks to strong car manufacturing numbers for the quarter.

Household spending grew by 0.5 percent  in the quarter, but business investment shrank by 1.2 percent, suggesting uncertainty among companies over the effects of Brexit.

Business investment had been expected to rise by 0.2 percent, according to forecasts. It has now contracted for three quarters in a row. The overall picture is one of an economy still recovering from an exceptionally weak, weather-affected start to the year. Construction and energy production both had a strong quarter and the weather played its part again in July, as sunshine and the World Cup boosted consumer spending. It’s the strongest quarter for nearly two years, but the economy didn’t keep up the strong momentum of July, with August and September registering no additional growth at all.

Worryingly but perhaps not surprisingly, business investment was down sharply, matching anecdotal evidence of firms’ caution ahead of Brexit. Although car production was up compared with the second quarter of this year, it is down compared with the same period last year and domestic car sales were very weak – it’s exports that are keeping the car industry ticking over.

Plenty for the chancellor to be cheerful about today, but a third quarter of falling business investment – the first time that’s happened since the financial crisis – shows that firms think the sun may be shining now, but big clouds are looming.

Source:BBC

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