Britain’s economic recovery lost steam in the third quarter with growth of 0.7%, according to the National Institute of Economic and Social Research.
NIESR’s estimate reflects a slight slowdown compared with the second quarter, when gross domestic product increased by 0.9%. If correct, it would mean the UK economy is 3.1% bigger than it was in the third quarter of 2013.
Simon Kirby, principal research fellow at the thinktank, said 0.7% was still a reasonable quarterly increase.
“Growth rates move around from quarter to quarter.We shouldn’t be surprised to see growth moderate somewhat from the very robust rate in the preceding quarter. It’s a story of continuing economic recovery.”
Kirby said manufacturing was holding back the UK economy, after the latest data from the Office for National Statistic (ONS) showed the sector barely grew in August.
Manufacturing output increased by just 0.1% over the month, while the broader measure of industrial production was flat. Kirby said there were a number of risks to the UK recovery.
“The eurozone is the biggest risk because it is the UK’s main trading partner. It is intertwined with our economic fortune, certainly in the short term.”
The UK economy is now 3.5% larger than it was at its previous peak in January 2008, according to NIESR’s estimates.
However, it said there was still a “reasonable amount” of spare capacity in the UK economy to be used up before the Bank of England starts raising interest rates.
NIESR expects the first increase in February 2015. Members of the Bank’s rate-setting monetary policy committee will announce its October policy decision on Thursday.
Economists widely expect rates to remain on hold at 0.5%, where they have been since March 2009, amid weak wage growth and signs that growth is slowing.
The ONS figures on factory output reflected the trend of slowing manufacturing growth indicated by the Markit/CIPS manufacturing PMI last week.
UK manufacturing has yet to fully recover from the financial crisis, with the sector 4.4% below its 2008 peak, according to the ONS.
Rob Wood, chief UK economist at the German bank Berenberg, said tensions between Russia and the west over Ukraine were indirectly having an impact on the sector.
“UK manufacturing is entering a soft patch as the fallout from events in Ukraine spreads. Ukraine and Russia are of little direct importance to UK exporters. But the manufacturing cycle is highly integrated across countries.
That means the decline in business confidence and German manufacturing output triggered by Russia’s aggression in eastern Ukraine will continue to spread to the UK over the second half of the year.”
Despite the poor monthly performance, recent large-scale revisions of historic data by the ONS suggested manufacturing fared better on an annual basis than previously thought.
Manufacturing output in the year to August was up 3.9%. Industrial production, which includes mining and utilities as well as manufacturing, grew by 2.5% over the year, but production remained 9.6% smaller than its pre-crisis peak.
theguardian.com
NIESR’s estimate reflects a slight slowdown compared with the second quarter, when gross domestic product increased by 0.9%. If correct, it would mean the UK economy is 3.1% bigger than it was in the third quarter of 2013.
Simon Kirby, principal research fellow at the thinktank, said 0.7% was still a reasonable quarterly increase.
“Growth rates move around from quarter to quarter.We shouldn’t be surprised to see growth moderate somewhat from the very robust rate in the preceding quarter. It’s a story of continuing economic recovery.”
Kirby said manufacturing was holding back the UK economy, after the latest data from the Office for National Statistic (ONS) showed the sector barely grew in August.
Manufacturing output increased by just 0.1% over the month, while the broader measure of industrial production was flat. Kirby said there were a number of risks to the UK recovery.
“The eurozone is the biggest risk because it is the UK’s main trading partner. It is intertwined with our economic fortune, certainly in the short term.”
The UK economy is now 3.5% larger than it was at its previous peak in January 2008, according to NIESR’s estimates.
However, it said there was still a “reasonable amount” of spare capacity in the UK economy to be used up before the Bank of England starts raising interest rates.
NIESR expects the first increase in February 2015. Members of the Bank’s rate-setting monetary policy committee will announce its October policy decision on Thursday.
Economists widely expect rates to remain on hold at 0.5%, where they have been since March 2009, amid weak wage growth and signs that growth is slowing.
The ONS figures on factory output reflected the trend of slowing manufacturing growth indicated by the Markit/CIPS manufacturing PMI last week.
UK manufacturing has yet to fully recover from the financial crisis, with the sector 4.4% below its 2008 peak, according to the ONS.
Rob Wood, chief UK economist at the German bank Berenberg, said tensions between Russia and the west over Ukraine were indirectly having an impact on the sector.
“UK manufacturing is entering a soft patch as the fallout from events in Ukraine spreads. Ukraine and Russia are of little direct importance to UK exporters. But the manufacturing cycle is highly integrated across countries.
That means the decline in business confidence and German manufacturing output triggered by Russia’s aggression in eastern Ukraine will continue to spread to the UK over the second half of the year.”
Despite the poor monthly performance, recent large-scale revisions of historic data by the ONS suggested manufacturing fared better on an annual basis than previously thought.
Manufacturing output in the year to August was up 3.9%. Industrial production, which includes mining and utilities as well as manufacturing, grew by 2.5% over the year, but production remained 9.6% smaller than its pre-crisis peak.
theguardian.com
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