UK progress slows over the summer season
Newsflash: the UK financial system has suffered a summer season slowdown.
GDP rose by simply 0.1% within the July-September quarter, knowledge simply launched by the Office for National Statistics exhibits.
That’s down from the 0.5% progress within the second quarter of the yr, and weaker than the 0.2% anticipated.
The scorecard for the Labour govenment’s first quarter in workplace exhibits that the companies sector grew by 0.1%, whereas building grew 0.8%.. however manufacturing fell by 0.2% within the quarter.
Key occasions
Resolution: UK falls off the highest of the G7 progress leaderboard
The Resolution Foundation have calculated that the UK has fallen behind the US for progress up to now this yr.
They clarify that the UK had the quickest rising financial system within the G7 within the first half of this yr, after rising by 1.2% from January to June.
But Britain’s GDP rebound has now “run out of steam”, with immediately’s knowledge displaying GDP slowing to 0.1% within the third quarter of 2024 (one of many weakest charges throughout the G7, as defined right here).
Resolution say this slowdown places UK progress over the primary three quarters of the yr at 1.3%, behind the US (1.9%) however forward of France and Italy (0.8% and 0.4%), with Canada set to remain simply behind the UK primarily based on present forecasts.
Simon Pittaway, senior economist on the Resolution Foundation, says:
“After bouncing again from recession earlier this yr, Britain’s restoration is already working out of steam. The UK has fallen under the US on the high of the G7 GDP progress leaderboard, with progress slowing, wage rises shrinking and employment beginning to fall.
“The UK has been a GDP rollercoaster over the previous 12 months, however its medium-term efficiency has been staid and stagnant. Over the previous 5 years, the financial system has shrunk by 0.7 per cent when you account for inhabitants progress.
“This all serves to highlight that the Government’s mission to renew strong economic growth is both extremely hard, and absolutely necessary.”
Economist specialists are in broad settlement that price range uncertainty harm progress over the summer season.
Hailey Low, affiliate economist on the National Institute of Economic and Social Research (NIESR), says:
“Today’s Q3 GDP figures, although much less sturdy than within the first half of the yr, mirror the affect of pre-budget uncertainty.
More notably, it’s disappointing that the Chancellor didn’t totally leverage her landmark price range final month to introduce measures addressing the UK’s low productiveness progress, tackling progress inertia, and stimulating long-term financial progress.”
Lindsay James, funding strategist at Quilter Investors, blamed ‘gloomy messaging’ from the federal government within the run-up to the price range:
“With the price range now firmly within the rearview mirror and the Chancellor reinvigorating her message of progress with the Mansion House speech, immediately’s quarterly GDP figures spotlight the malaise the UK nonetheless finds itself in. Despite good momentum early this yr, progress has stumbled as soon as once more, rising simply 0.1% over the past three months, with September really seeing a contraction.
Much of this can have been on account of the gloomy messaging that was persistent within the run as much as the price range, inflicting customers and companies to pause spending and await what ache was to return.
Here’s Jeremy Batstone-Carr, European strategist at Raymond James Investment Services:
“This morning’s knowledge confirms that the tempo of UK financial growth slowed within the run-up to Rachel Reeves’ inaugural Budget. As customers and companies waited to listen to the Government’s fiscal coverage plans, financial exercise decelerated, though to not a halt. Despite weak point in authorities spending and commerce, buoyancy in client spending was adequate to develop the financial system by 0.2% within the third quarter of this yr.
Reeves: I’m not glad with these numbers
Chancellor Rachel Reeves says she is “not satisfied” with immediately’s GDP figures displaying the financial system slowed over the summer season.
Reeves says:
“Improving financial progress is on the coronary heart of every part I’m looking for to realize, which is why I’m not glad with these numbers.
“At my Budget, I took the tough selections to repair the foundations and stabilise our public funds.
“Now we are going to deliver growth through investment and reform to create more jobs and more money in people’s pockets, get the NHS back on its feet, rebuild Britain and secure our borders in a decade of national renewal.”
UK in direction of backside of G7 progress desk for Q3
Today’s GDP report exhibits that the UK is sitting in direction of the underside of the G7 for progress over the summer season.
Here’s how the lacklustre progress of simply 0.1% final quarter compares with different main economies:
Labour have pledged to ship the “highest sustained growth in the G7”; immediately’s knowledge exhibits loads of progress is required…..
Luke Bartholomew, deputy chief economist at funding group abrdn, additionally factors the finger on the price range:
“The economy was always going to slow from the famously “gangbusters” tempo of the primary half of this yr, however the extent of the slowdown is a little more pronounced than anticipated.
With exercise progress in September being reported as notably weak, it’s believable that a few of slowing is the results of elevated uncertainty at the moment, as corporations and households speculated about doable tax modifications forward of the Budget. That stated, it’s also doable that this simply represents regular month-to-month volatility reasonably than something extra elementary.
In any regard, the contents of the Budget ended up considerably boosting the expansion and inflation image for 2025, and so in that context these knowledge will most likely do little to vary the pondering on the Bank of England. We proceed to anticipate additional gradual easing, with the subsequent charge reduce coming early subsequent yr.”
CBI: Budget uncertainty most likely performed ‘huge half’ in summer season slowdown
The CBI are blaming the uncertainty round final month’s price range for the slowdown in progress over the summer season.
Ben Jones, CBI Lead Economist says:
“The UK financial system stalled over the third quarter. Uncertainty forward of the Budget most likely performed an enormous half, with corporations extensively reporting a slow-down in determination making. Hopefully this can show to be a blip. We nonetheless anticipate the financial system to return to a path of modest progress within the yr forward. But draw back dangers to the outlook have elevated.
“The Budget has set off warning lights for enterprise. The hike in National Insurance Contributions alongside different will increase to employers’ price base will add to the burden on enterprise. And it’s anticipated to set off a extra cautious method to pay, hiring and funding as firms work by what it means for their very own budgets.
Here’s a chart displaying how the UK financial system fared over the past quarter – shrinking within the second half of final yr, earlier than returning to progress in 2024:
ONS: progress was subdued throughout most industries
ONS Director of Economic Statistics Liz McKeown says:
“The economy grew a little in the latest quarter overall as the recent slowdown in growth continued. Retail and new construction work both performed well, partially offset by falls in telecommunications and wholesale. Generally, growth was subdued across most industries in the latest quarter.
“In September the economy shrank a little. Services showed no growth with a notable increase in car sales offset by a slow month for IT companies. Production fell overall, driven by manufacturing, though there was an increase in oil and gas extraction.”
Economy shrank in September
The UK financial system ended the summer season on a weak be aware, with GDP contracting in September.
Today’s GDP report exhibits that month-to-month actual GDP is estimated to have fallen by 0.1% in September.
This was largely as a consequence of declines in manufacturing output and data and communication companies, the ONS says.
While the companies sector stagnated in September, manufacturing output fell by 0.5% within the month, however building output grew by 0.1%.
Real GDP per head fell in Q3
Disappointingly, the financial system really contracted within the final quarter when you regulate for inhabitants modifications.
Real GDP per head is estimated to have fallen by 0.1% within the third quarter of 2024, and is flat, in contrast with the identical quarter a yr in the past, the ONS says.
That’s one indicator for a rustic’s dwelling customary.
UK progress slows over the summer season
Newsflash: the UK financial system has suffered a summer season slowdown.
GDP rose by simply 0.1% within the July-September quarter, knowledge simply launched by the Office for National Statistics exhibits.
That’s down from the 0.5% progress within the second quarter of the yr, and weaker than the 0.2% anticipated.
The scorecard for the Labour govenment’s first quarter in workplace exhibits that the companies sector grew by 0.1%, whereas building grew 0.8%.. however manufacturing fell by 0.2% within the quarter.
We’ve additionally discovered in a single day that Japan’s financial system slowed over the summer season.
Japan’s GDP rose by simply over 0.2% in July-September, in keeping with new authorities knowledge that exhibits the financial system grew at an annualised charge of 0.9% in Q3.
That’s a slowdown on Q2, when Japan’s financial system grew by round 0.55%.
Although family spending held up within the final quarter, there was a dip in capital spending as corporations held again from funding selections. Net commerce additionally had a detrimental affect on progress.
Bank of England governor says Brexit has undermined UK financial system
Heather Stewart
Brexit has additionally been holding again the UK financial system, the Bank of England governor warned final evening as he urged ministers to “rebuild relations” with the EU.
Speaking on the Mansion House dinner within the City of London on Thursday night, Andrew Bailey stated he took no place on Brexit “per se”, however added: “I do have to point out consequences.”
He stated Brexit had “weighed” on the financial system, declaring specifically the affect of Brexit on the UK’s commerce in items, including:
“It underlines why we must be alert to and welcome opportunities to rebuild relations while respecting the decision of the British people.”
Keir Starmer’s authorities has pledged to deepen cooperation with the EU, although Brussels has made clear it’s unwilling to carry wide-ranging negotiations on the commerce and cooperation settlement (TCA).
Labour is against re-entering the EU’s single market or customs union. Instead, the federal government hopes to win extra modest modifications similar to mutual recognition {of professional} {qualifications} and a veterinary settlement that might alleviate the necessity for checks on meals exports.
Introduction: UK GDP report developing
Good morning, and welcome to our rolling protection of enterprise, the monetary markes and the world financial system.
Keir Starmer and Rachel Reeves are about to get their first quarterly progress report since taking workplace, and it’s not anticipated to be glowing.
At 7am GMT the primary estimate of UK GDP for the third quarter of 2024 will likely be launched, in addition to for September alone.
Economists predict the financial system grew by 0.2% in July-September, a comparatively weak progress charge. That could be a slowdown on the 0.5% progress recorded in April-June, and the 0.7% in January-March.
If that occurs, Labour’s gloomy discuss since successful the overall election in early July is more likely to take another blame. Warnings of a ‘painful’ price range hit confidence amongst each customers and companies, which could have a knock-on affect on spending, and funding selections.
On the opposite hand, Reeves might nicely argue {that a} slow-moving financial system justifies her push for progress – though the additional spending specified by final month’s price range is just anticipated to offer a short-term elevate to financial output…
Previous knowledge have proven that the UK financial system stagnated in June and July – because the restoration from final yr’s shallow recession light – earlier than returning to progress in August.
Sanjay Raja, chief UK economist at Deutsche Bank, predicts that the UK financial system moved from a “spring sizzle” to a “summer simmer”.
After a stable H1-24, UK progress over summer season will probably gradual. We anticipate Q3-24 GDP progress to gradual to a extra paltry 0.2% quarter-on-quarter.
We see September GDP, which can even be launched as a part of the GDP knowledge dump, rising by 0.2% month-on-month. Risks are skewed larger on the quarterly print, however decrease on the month-to-month September print, we expect.
The agenda
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7am GMT: First estimate of UK GDP for Q3 2024
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7am GMT: First estimate of UK GDP for September 2024
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7am GMT: UK commerce steadiness for Q3 2024
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8.30am GMT: Hong Kong’s GDP report for Q3 2024
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9.30am GMT: UK productiveness knowledge for Q3 2024
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1.30pm GMT: US retail gross sales for October
