World Economy

UK Economy Slows Down

UK Economy Slows DownUK Economy Slows Down

Lackluster figures for UK industrial output and trade have underscored how slowing global economic growth has taken its toll on the British economy though some of the data weren’t as weak as economists expected.

Production by British industries rose only 0.2% in September, the Office for National Statistics said on Friday, compared with an 0.9% increase in August, MarketWatch reported.

The country’s trade deficit narrowed to £1.4 billion ($2.1 billion) during the month, £1.6 billion below the gap recorded in August, but was still wide enough to detract from economic growth in the third quarter, the ONS said.

While the data was stronger than economists polled by The Wall Street Journal were expecting, it confirms the British economy is slowing as the year comes to an end as less dynamic growth in China weighs on activity worldwide.

The UK economy grew 0.5% between July and September, slower than the second quarter’s 0.7% rate of expansion. The Bank of England still expects growth to eventually be revised up to 0.6%, but Friday’s data makes that upgrade less likely.

The British central bank has itself turned slightly gloomier on Britain’s prospects in the near term. In their monthly policy decision Thursday, rate-setters at the Bank of England pointed out that “the outlook for global growth has weakened” since the summer, even though they had so far shrugged off fears of a Chinese-led slowdown impacting the British economy.

The UK economy sells less than 4% of its exports to China, but analysts highlight it could still be affected if its main trading partners take a hit. Business surveys show British firms already face large hurdles in selling their products abroad due to the strength of the pound against other major currencies, but could see exports decline further if the world economy slackens.

Even though Friday’s data showed exports rose in September due to an increase in the sales of chemicals overseas, the trade deficit narrowed chiefly because of a fall in imports.

BOE policymakers left interest rates unchanged at their current 0.5% for yet another month and implied a gloomier global outlook could keep them pegged at this record-low level at least until the second half of 2016. Investors reacted in surprise by driving the pound to weaken against the US dollar and pushing down government bond yields.