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Bloomberg
A picture of inflation-squeezed consumers and Brexit-wary companies emerged in the UK’s latest overview of its economy.
Annual growth in the third quarter slowed to 1.7 percent, slightly higher than previously estimated but still the weakest pace in 4 1/2 years, the Office for National Statistics (ONS) said. The economy expanded an unrevised 0.4 percent from the second quarter, well below the rates seen before the EU referendum 18 months ago.
Separate figures showed the dominant services industry, which provided almost all of the economy’s growth in the third quarter, rose 0.2 percent in October.
Taken together with a mildly positive manufacturing performance in the month, it suggests the economy has been steady this quarter as the Bank of England raised interest rates for the first time in a decade in November.
Bloomberg Economics estimates the economy will maintain its pace this quarter, expanding 0.4 percent. But it says there’s no reason for the central bank to rush though with more tightening.
“Similar gains are likely over 2018 but they won’t be fast enough to put a rocket under the dormant wage growth figures,†said BE’s Dan Hanson. “Headline inflation falling back, together with weak underlying cost pressure, should stay the BOE’s hand next year.â€
The economy, which lost momentum in 2017, will probably expand 1.5 percent this year and 1.4 percent in 2018, according to a Bloomberg survey. That would be well behind the rates expected for both the US and euro area.
The news on growth highlights the twin pressures facing the UK, both of them relating to Brexit.
Disposable incomes rose 0.4 percent from a year earlier after adjusting for inflation, which has been driven higher by the fall in sterling since the vote to leave the EU. Consumer spending climbed 1 percent, the least in 5 1/2 years.
The ONS also said that households have paid out more money than they received for four consecutive quarters, the first time that’s happened since records began in 1987.