- GDP + 1.3% in the third quarter compared to Reuters survey forecast + 1.5%
- Production in September exceeded forecast, but July and August were revised downwards
- The UK economy lagged other G7 countries in the third quarter
- Services strengthened through more doctor visits
- Trade deficit widening in the third quarter
LONDON, Nov 11 (Reuters) – Britain’s economic recovery from the coronavirus pandemic lagged other wealthy nations in July-September, according to official figures, underscoring the Bank of England’s interest rate dilemma.
Gross domestic product grew 1.3%, the weakest three-month growth since the UK lockdown in early 2021.
The Bank of England and a Reuters poll of economists had forecast growth of 1.5%.
The National Statistics Office said the UK economy was 2.1% smaller than at the end of 2019, a bigger lag than the rest of the Group of Seven Germany, Italy and France.
The United States is past its pre-crisis size. Canada and Japan, the other G7 members, have not yet released third-quarter growth data, but were able to gain more ground in the second quarter than the UK achieved in the third quarter.
Thursday’s data showed UK GDP grew 0.6% in September – more than a 0.4% forecast in Reuters poll – but estimates for the previous months have been revised downwards.
GDP declined 0.2% in July, a decline more than the previously estimated 0.1% decline, while production rose by just 0.2% in August, weaker than the originally reported 0.4%.
“Although monthly production has rebounded over the quarter since the decline in July, it is more of a temporary boost from the easing of restrictions,” said Suren Thiru, head of the UK Chamber of Commerce’s economics department.
The BoE said last week, while keeping rates unchanged, that recent economic growth has been weaker than expected and will keep a close eye on the state of the labor market after the government’s health and safety program ended on October 1.
Paul Dales, an economist at Capital Markets, a consulting firm, said he expected the 0.6% growth posted in September to fizzle out quickly.
“That’s one reason we doubt the Bank of England will raise rates above 0.50% next year,” he said.
The BoE shocked financial markets last week when it left its policy rate at an all-time low of 0.1%, despite forecasting inflation to hit close to 5%, more than double its 2% target.
September GDP growth was supported by stronger production in the health sector as people returned to see their doctors after falling during the pandemic, resulting in a 0.7% increase in the service sector from August.
However, industrial production fell 0.4% as gas distribution contracted for the fourth straight month.
The world’s fifth largest economy contracted nearly 10% in 2020, more than most other large rich nations.
But the International Monetary Fund forecast in October that it was well on its way to the fastest expansion of any G7 country in 2021, when it should grow 6.8%.
However, the rapid recovery from the spring lockdown gave way to slower growth in the summer due to a combination of rising COVID-19 cases, global supply chain issues and the shortage of some post-Brexit workers.
The ONS reported a decline in underlying manufacturers’ inventories during the July-September period, reflecting some of the recent challenges in the supply chain.
Separate data showed that the UK’s goods trade deficit widened by Â£ 9 billion to Â£ 42.3 billion in the third quarter, driven by rising imports from EU and non-EU countries while exports fell – particularly to non-EU countries. Countries.
Letter from William Schomberg; Editing by Andy Bruce, Kate Holton and Gareth Jones
Our standards: The Thomson Reuters Trust Principles.