UK economic growth picks up slightly in third quarter

 
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The services sector again accounted for the lion's share of growth (Source: Getty)

The UK's economic growth picked up moderately in the third quarter as GDP increased by 0.4 per cent after the manufacturing sector returned to expansion.

Britain's manufacturers had recorded a weak second quarter, with output actually falling, but the sector returned to growth in the three months to September, expanding by one per cent, the Office for National Statistics (ONS) revealed today in a preliminary reading.

Output from the dominant services sector grew by 0.4 per cent, the same rate as the previous quarter. A strong performance in computer programming, motor trades and the retail trade ensured it was the main driver of growth overall.

Read more: Slowing manufacturing output holds back UK economy

However, the construction industry, often seen as a bellwether for the broader economy, contracted for the second quarter in a row.

Sterling regained some of yesterday's losses against the US dollar after the headline reading came in a notch above economists' consensus forecasts of 0.3 per cent quarterly growth. the pound traded at highs of $1.317 against the greenback.

The slight acceleration in UK growth will offer some relief in an economy which has suffered a sluggish 2017 so far, after quarterly growth remained flat at 0.3 per cent in the first half of the year.

Growth has slowed since a strong second half of 2016, as the impact of weaker sterling since the EU referendum in June 2016 continues to feed through. Inflation reached three per cent in the year to September, dragging back consumer spending.

Read more: UK GDP growth to edge higher for the third quarter

GDP per head, the measure of output adjusted to population changes, was estimated to have increased by 0.3 per cent during the period.

The figures could allow the Bank of England to justify raising interest rates at its meeting next week, undoing the emergency cut announced following the Brexit vote last August. The growth pick-up is "the last piece in the data jigsaw", according to Peter Dixon, an economist at Commerzbank.

"There is now nothing standing in the way of the MPC acting on the message which it has been giving to the market since September that a near-term rate hike is warranted," he added.

The increased growth also offers a modicum of extra room for manoeuvre for chancellor Philip Hammond ahead of the Autumn Budget on 22 November.

In response to the figures Hammond said the UK economy is "successful and resilient". He added: "My focus now, and going into the Budget, is on boosting productivity so that we can deliver higher-wage jobs and a better standard of living for people across the country."

Read more: OECD: Reversing Brexit would give "significant" boost to UK economy

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