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UK economy grows strongly in Q3, with hints of tougher times ahead

Reuters  |  LONDON 

By and Alistair Smout

LONDON (Reuters) - Britain's economy picked up pace during the third quarter, growing at the fastest rate since late 2016, but this may prove a high watermark ahead of Brexit, official figures showed on Friday.

in the three months to September was 0.6 percent higher than in the previous quarter, matching the consensus forecast in a poll of economists, figures from the (ONS) showed.

Compared with a year earlier, the economy stood 1.5 percent larger, up from an annual rate of growth of 1.2 percent in the three months to June.

While Britain's economy outpaced the euro zone's by a large margin during the third quarter -- helped by solid consumer spending during a warm summer and -- there were some unpromising signs for the months ahead.

"It remains likely that the stronger growth recorded in the third quarter is a one-off for the UK economy," Suren Thiru, at the British Chambers of Commerce, said.

"Persistent Brexit uncertainty and the financial squeeze on consumers and businesses (is) likely to weigh increasingly on economic activity in the coming quarters," he added.

In September alone, Britain's economy stagnated for a second month running, compared with forecasts for a 0.1 percent expansion.

Sterling and bonds showed little reaction to the data, which were largely as expected.

The figures showed trade contributed strongly to growth over the third quarter, as imports of cars into Britain dropped sharply -- tallying with

Business investment unexpectedly contracted by 1.2 percent, the biggest drop since early 2016, adding to signs of rising caution among companies ahead of Brexit in March next year.

Surveys of companies over the last month suggest growth looks likely to slow sharply in the final months of 2018, as a boost to consumer spending from warm weather and fades away.

Last week the forecast a slowdown in GDP growth to 0.3 percent for the last quarter of the year.

Britain's economy slowed after the June 2016 Brexit vote, its annual growth rate slipping from top spot among the group of rich nations to jostling with long-term laggards and for bottom place in the rankings.

Consumers in particular were squeezed by the jump in inflation which followed the pound's tumble after the referendum, especially as wages have failed to keep up.

That said, in recent months the warm summer encouraged many to splash out on drinks and pub and restaurant visits.

Household spending remained solid, expanding 0.5 percent after a 0.4 percent rise in the second quarter.

Trade contributed 0.8 percentage points to Britain's economic growth rate in the third quarter, the biggest boost since early 2016 and reversing a large drag in the previous quarter.

(Reporting by and Alistair Smout; Editing by Angus MacSwan)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Fri, November 09 2018. 16:08 IST