UK GDP growth to edge higher as economists forecast a lacklustre end to 2017

 
Rebecca Smith
Industrial production is likely to have been a bright spot
Industrial production is likely to have been a bright spot (Source: Getty)

GDP growth is set to come in at 0.3 per cent for the third quarter when figures are published on Wednesday.

That would mark the third consecutive quarter at that rate, after the first and second quarters marked the weakest six-month performance since the first half of 2012.

And economists are forecasting a lacklustre end to the year and beginning of 2018 with the squeeze on consumer purchasing power, while ongoing business Brexit jitters look to hinder investment.

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Howard Archer, chief economic adviser to the EY Item Club, said the UK's " subdued growth performance" was highly likely to have continued, with a strong chance GDP growth will again come in at 0.3 per cent for the third quarter, though “a slight uptick” to 0.4 per cent is also possible.

“We suspect that the economy will continue to see lacklustre growth over the fourth quarter of 2017 and the early months of 2018. The squeeze on consumers will remain appreciable in the near-term and could very well deepen in Q4 2017 as consumer price inflation is likely to hover at three per cent or just above and earnings growth remains subdued,” Archer added.

He said:

Meanwhile, businesses look likely to be cautious over investment as Brexit negotiations between the UK and EU likely progress relatively slowly.

Recent decent foreign manufacturing orders fuels hopes that net trade will contribute to growth helped by a still very competitive pound and healthy global growth, but the export performance has been patchy.

Third quarter GDP growth is likely to have been bolstered by a solid industrial production performance, with Archer noting that the latest data shows that it was up by 0.9 per cent in the three months to August compared with the three months to May, with manufacturing output up by 0.7 per cent.

But the overall boost from improved industrial production will be limited as it accounts for 14 per cent of total UK output.

Meanwhile, growth in the dominant services sector is set to have been rather muted for the period, while construction output is expected to have contracted quite notably.

Analysts at Investec said the expected 0.3 per cent rise in output for the three months to the end of September is unlikely to "scupper the Bank of England’s plans for a rate hike on 2 November".

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