In the third quarter of this year, the UK economy’s growth fell to 0.5% as a result of poor performances in the sectors of manufacturing and construction.
Between July and September of this year, economic growth was at a level of 0.5%, according to the Office For National Statistics. This represented a fall of 0.2% from the 0.7% seen in the second quarter.
This has come as a surprise to analysts, many of whom had predicted a growth level of 0.6%.
It is believed that the fall was largely down to the 2.2% drop in the construction industry, which was the biggest fall of its kind for three years.
The service sector makes up the largest part of the United Kingdom’s economy. It performed better and saw a rise of 0.7% over the same period of time. However, the manufacturing industry saw a fall of 0.3% in the third quarter.
The chief economist at research firm Markit, Chris Williamson, commented on the statistics saying:
“The slowdown is being led by the manufacturing sector, which is seeing a renewed recession as output has now fallen for three consecutive quarters, suffering a 0.3% decline in the three months to September,”
“Manufacturing output has so far fallen 0.9% this year. Producers are struggling as weak demand in many overseas markets, notably China and other emerging nations, is being exacerbated by the appreciation of sterling.”
The BBC’s economics editor, Robert Peston, said:
“We’re not immune to the Chinese-led worldwide deceleration. And all the signs are that growth in the fourth quarter of the year will soften again.”
“This doesn’t mean a painful recession is about to rear up and bite us. Annual growth for 2015 is heading for a healthy, if slightly below trend, 2.3%.”
“But it does mean the ride into 2016 may get slower and bumpier.”
The ONS believe that the drop in construction could have been, in part, due to the particularly rainy weather in August.
The chief economist at PwC, John Hansworth, stated that:
“Overall, the picture of a steady recovery in the UK economy continues and we would now expect GDP growth of around 2.4% for the year as a whole,”
Reuters recently conducted a survey of economists, which revealed that many of them have now begun to predict a later increase of interest from the Bank of England. The consensus is now that the Bank will wait until the second quarter of 2016, instead of lifting the base rate in the first quarter as initially expected.
It is, however, important to note that this is only the first estimate for economic growth in this period and it has only been based on half of the data set that will be taken into account.
Currency economist at the Bank of Tokyo-Mitsubishi, Lee Hardman, commented:
“The market has pushed the first rate hike way out into the future, so I don’t think today’s GDP figures are going to have much impact in terms of that timing,”