UK economy grows at slowest annual rate since 2010 in Q3

Tuesday, 12 November 2019 00:00 - - {{hitsCtrl.values.hits}}

Customers shop for fruit and vegetables inside a supermarket in London, Britain 7 August – Reuters

LONDON (Reuters): Britain’s economy grew at the slowest annual rate in nearly a decade in the three months to the end of September, as a global slowdown and Brexit worries hit business investment and manufacturing.

Year-on-year gross domestic product growth slowed to 1.0% from 1.3% in the second quarter, Britain’s Office for National Statistics said, its lowest since the first three months of 2010 and just below economists’ forecasts in a Reuters poll of 1.1%.

The slowdown reflected a smaller-than-expected rebound in quarterly GDP growth after a contraction in the second quarter, when businesses faced an overhang of stocks of raw materials after Brexit was delayed from the end of March.

“Looking at the picture over the last year, growth slowed to its lowest rate in almost a decade,” an ONS spokesperson said.

During the third quarter, when Boris Johnson became prime minister, there were increasing concerns among businesses that Britain could have been heading for a no-deal Brexit on 31 October.

In the event, parliament forced Johnson to seek a delay and he has now called an early election for Dec. 12 in an attempt to win a large enough majority for his preferred Brexit deal before a new deadline of Jan. 31. Gross domestic product expanded at a quarterly rate of 0.3% in the third quarter of 2019, below the 0.4% reading expected by the Bank of England, as well as by private-sector economists.

Britain’s economy has lost momentum since the 2016 Brexit referendum, before which it typically grew more than 2% a year.

Last week the BoE nudged up its growth forecast for 2019 to 1.4% from 1.3% - largely because of its expectation of a bigger pick-up in the third quarter than it forecast before. This would be the same growth rate as 2018 and the weakest since the financial crisis, while for 2020 the BoE expects a further slowdown to 1.3%.

On top of Brexit, businesses across Europe have been suffering spill-over from the US-China trade war. Euro zone annual GDP growth slowed to 1.1% in the third quarter from 1.2% in the quarter before.

Monday’s data showed business investment held steady in the third quarter versus economists’ expectations for a 0.5% fall.

Household spending, which has been much more than resilient business investment, due to falling unemployment and rising wages, rose by 0.4% on the quarter while government spending increased by 0.3%.