UK economic growth slows

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. 

Interest rates

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.

GDP

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.