Economic growth in the UK slowed more than expected for the three months to September, according to official data.
The slowdown comes following the biggest fall in construction for three years and could indicate that a period of rapid growth is coming to an end.
Data from the Office for National Statistics (ONS) released on Tuesday (October 27th) showed that third-quarter gross domestic product growth slowed to 0.5 per cent – that's compared to 0.7 per cent in the three months to June. Economists had predicted a smaller 0.6 per cent drop.
Compared to a year earlier, output was 2.3 per cent higher – the smallest increase in two years. Forecasts had expected to sustain the 2.4 per cent of growth from the second quarter of the year.
Economists at Reuters say that the latest growth figures may "give pause for thought to the Bank of England".
The Bank had expected for the economy to grow during the third quarter – following the economic results, however, there may be another delay before interest rates go up, the economists explain.
A number of factors may have played a part in the slowdown. China's economic downturn was a main concern for the quarter, but the biggest driver for the drop in British GDP was a 2.2 per cent decline in the domestic construction industry.
The ONS also said that the rainy August may have played a part in the financial results. The quarterly estimate assumed that growth in the sector would bounce back by 1.3 per cent in September.
The ONS data is a preliminary estimate of GDP growth and is based on less than half of the data that will be used for the final results, which will be published in a couple of months.
Services is the largest part of the economy and was also the biggest contributor to growth. It grew strongly, rising by 0.7 per cent during the quarter – this was the strongest performance since the final quarter of 2014.
However, manufacturing output dropped by 0.3 per cent, and this was the third consecutive quarter it has seen contraction. Overall industrial output was supported by growth in oil production, as there were fewer maintenance shutdowns than in previous years.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.