UK GDP shows higher-than-predicted growth in Q3

Ann Santiago
October 26, 2017

'While GDP growth in Q3 was a slight uptick on the previous quarter, the UK's combined economic growth performance over the first nine months of 2017 was still the weakest since late 2012, and indicates that the United Kingdom economy remains locked onto a low growth trajectory.

The Bank of England is widely expected to return rates to 0.5% from 0.25% after its policy meeting next week, the first hike in borrowing costs in over a decade, though there are doubts about whether that will be the start of a steady tightening cycle.

To be clear, any rate rise will be small.

Sterling climbed nearly a full percentage point against the USA dollar on the figures, which beat the average forecast for growth of 0.3% in a Reuters poll of economists.

Meanwhile, construction contracted for the second quarter in a row with output shrinking 0.7 percent.

Industrial production also rose by 1 per cent during the third quarter, boosted by a 1 per cent jump from manufacturing and a 1.5 per cent rise from mining and quarrying.

"We have a successful and resilient economy which is supporting a record number of people in employment", said finance minister, Philip Hammond.

One rate rise, or more?

The Bank's deputy governor said on Monday that a rate rise in November remained an "open question".

Markets are now pricing in an 80% chance of a rate rise next week, but the central bank has disappointed on this score before.

Construction continued to struggle, however, contracting by 0.7% on the quarter - its sharpest fall since the third quarter of 2012.

However he acknowledged there was nothing in this or other recent data that suggested the slowdown was in danger of turning into a recession or a shorter timetable for the expected interest rate rise.

The growth came despite financial and economic worries over Brexit and a future trade deal with the EU.

British five-year government bond yields also rose to their highest since last year's vote to leave the European Union as markets anticipated a quicker pace of BoE rate rises next year.

'The manufacturing sector was a bright spot for the United Kingdom economy in Q3, with output picking-up in the quarter.

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