World Economy

UK Economy Slows More Than Expected

UK Economy Slows More Than ExpectedUK Economy Slows More Than Expected

British economic growth slowed more than expected in the three months to September after the biggest fall in construction in three years, raising the chances that a period of rapid economic growth is coming to an end.

Third-quarter gross domestic product growth slowed to 0.5%, from 0.7% in the three months to June, a bigger slowdown than economists’ forecasts of a small drop to 0.6%, the Office for National Statistics said on Tuesday, BDLive reported.

Output was 2.3% higher than a year earlier, compared with a forecast for it to sustain the second quarter’s 2.4% rate of growth, and the smallest increase in two years.

In 2013 and 2014, the UK economy caught up some of the ground it lost after the financial crisis and was the fastest growing in the Group of Seven, a group consisting of the finance ministers and central bank governors of seven major economies.

But earlier this month the International Monetary Fund forecast growth would slow to 2.5% this year, closer to Britain’s long-run average.

The latest growth figures may also give pause for thought to the Bank of England, which had also forecast that the economy would grow by 0.6% in the third quarter.

Economists in a Reuters poll on Monday had pushed back their average expectation of when the BoE would start to raise interest rates to the second quarter of 2016 from the first.

Although the biggest economic worries over the quarter centered on a stock market tumble in China, the main driver for the fall in British GDP was a 2.2% decline in the domestic construction industry.

The ONS said that unusually wet weather in August may have played a role, and that its quarterly estimate assumed that growth in the sector had bounced back by 1.3% in September.

The ONS’s preliminary estimate of GDP growth is based on less than half the actual data that will go into the final estimate published in a couple of months’ time.

Services output—the largest part of the economy and by far the biggest contributor to growth—continued to grow strongly, rising by 0.7% on the quarter, its strongest performance since the last quarter of 2014.

Manufacturing output dropped by 0.3% on the quarter and has contracted for three quarters in a row, but overall industrial output was supported by growth in oil production due to fewer maintenance shutdowns than in previous years.

Earlier official data had shown a slowdown in industrial output in August, as well as a chunky fall in construction. A subsequent private-sector survey have showed the biggest drop in industrial orders in three years as overseas demand falters.

However, consumer demand has remained solid, with retail sales growing more strongly in the third quarter of the year than in the second.