The UK may have avoided a technical recession, with a return to growth in the third quarter after a period of contraction in the second quarter, but there wasn’t much else to cheer in today’s GDP update.
This was reflected in the performance of the pound which slipped back, albeit modestly, against the dollar in the immediate aftermath of the release.
UK GDP grew by 0.3% in the third quarter of 2019, according to a preliminary estimate from the Office for National Statistics (ONS). The market had been expecting growth of 0.4%.
During the month of September, GDP fell by 0.1%. 'GDP grew steadily in the third quarter, mainly thanks to a strong July,' the ONS says. 'Services again led the way with construction also performing well.'
'Manufacturing failed to grow as falls in many industries were offset by car production bouncing back following April shutdowns.'
GROWTH SLOWEST FOR NEARLY A DECADE
'Looking at the picture over the last year, growth slowed to its lowest rate in almost a decade.'
As the ONS observes, year-on-year growth in Q3 came in at 1%, the lowest level since the first three months of 2010, just after the end of the financial crisis.
Nancy Curtin, chief investment officer of Close Brothers Asset Management, speculates if the data is weak enough to prompt a cut in UK interest rates. This follows a surprise split vote on 7 November which saw two members of the Bank of England’s Monetary Policy Committee (MPC) vote for a rate cut.
She says: ‘The economy is struggling, and kicking the Brexit can down the road has denied businesses the certainty they so sorely need, with investment spending collapsing as a result.
‘A higher household saving ratio suggests that consumers are also cautious. The BoE forecasts an investment rebound if a Brexit deal removes no-deal risk but we think this is optimistic.
‘If uncertainty does indeed continue, in concert with a weak external environment, the MPC is likely to act. We have now seen the first split interest rate vote since June 2018 and, even if a Brexit deal is delivered, a rate cut looks probable in 2020.’