UK GDP Figures - comment

Marie Harrington
October 26, 2017

Emmanuel Lumineau, CEO at BrickVest, said: "Today's announcement that UK GDP growth has accelerated to 0.4% in Q3 is good news for the economy and will bolster the case for higher interest rates for the first time in more than a decade".

The rate of quarterly growth is up 0.1 per cent on last quarter, when it was 0.3 per cent.

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

Azad Zangana, Schroders senior European economist agrees a rate rise is likely: "It is hard to see why the Bank of England would suddenly change its policy bias now and not raise interest rates in November".

This beat economists' forecasts for a 0.3% rise, and was largely thanks to growth in the business services and finance sector, which expanded by 0.6% in the three months to September.

Sterling shot up following the release, rising more than 0.3pc against both the United States dollar and the euro to 1.317 and 1.119, respectively.

'While the services sector was the largest contributor to GDP growth in Q3, the latest data confirms that activity in the sector remains muted, with growth unchanged from the previous quarter. For the commercial real estate industry, higher interest rates and rising inflation make borrowing and construction more expensive for owners, which can have a constraining effect on the market but can also lead to an increase in property prices.

"Manufacturing also boosted the economy with an improved performance after a weak second quarter", Darren Morgan, the ONS' head of national accounts said in a statement.

More news: Appeals court paves way for undocumented teen to have abortion

Richard Stone, chief executive at The Share Centre said people shouldn't panic just yet: "It should be remembered that any increase in rates will likely just be a reversal of the cut in August 2016".

Although unemployment is at a 42-year-low, slow wage growth and inflation of around three percent are weighing on consumer purchasing power, while uncertainty over Brexit negotiations continue to cast a cloud over investment and business confidence.

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.

On a yearly basis, economic growth held steady at 1.5 percent in the third quarter, which was in line with expectations.

"Despite today's marginal improvement, growth has been relatively lacklustre this year".

However, the United Kingdom economy is still struggling to bounce back to levels seen in the final quarter of 2016 when GDP rose by 0.6pc. Longer term, stronger economic growth both here in the United Kingdom and overseas should drive improved corporate performance supporting higher market valuations.

Other reports by TheSundaySentinel

Discuss This Article