- Samuel Tombs, economist at Capital Economics Ltd
The British economy expanded at a 0.7% pace in the three months through September, as services sector activity unexpectedly deteriorated from the preceding quarter. Meeting economists' predictions, the UK GDP rose 0.7%, down from 0.9% in the second quarter, while the annual growth also decelerated to 3% compared to 3.2% recorded in the second quarter. Preliminary estimate is based on 44% of all the data available and consists of the output side of GDP, and thus it may be subject to further revisions in the next two estimates due to be released in November and December.
The slowdown comes as Bank of England policy makers become more worried about risks from the weakness in the Euro area, UK's top trading partner. A surprisingly weaker services sector, which makes up 78% of total GDP, dragged down overall growth, as its output fell to 0.7% on a quarterly basis, compared with 1.1% in the second quarter. However, production in the construction sector grew a solid 0.8%, up from 0.7% in the previous three months, while industrial output rose 0.5%, up from 0.2% in the second quarter. While the UK's growth may be losing steam, the economy has expanded for seven consecutive quarters and GDP is now 3.4% above its previous 2008 high. The central bank maintained its key interest rate at a all-time low 0.5% this month.
© Dukascopy Bank SA