OVERSEAS trade has exerted the biggest drag on UK growth since comparable records began, according to official data that confirm a sharp slowdown in economic expansion in the third quarter.
The figures, published by the Office for National Statistics (ONS), raised further concerns over the unbalanced UK economic recovery and sent sterling to a three-week low of $1.5028.
The data confirmed that UK gross domestic product growth had slowed to a below-trend 0.5 per cent in the third quarter, from 0.7 per cent in the three months to June. The ONS calculated that net trade accounted for a 1.5-percentage-point drag on growth in the third quarter, the biggest since comparable records began in 1997.
This outturn is in contrast to Chancellor George Osborne’s vision of “a Britain carried aloft by the march of the makers”.
The UK’s global trade deficit widened from £7.7 billion in the second quarter to £14.2bn in the three months to September.
And the decline in UK manufacturing output in the third quarter was revised to a sharper 0.4 per cent, from the 0.3 per cent decline estimated last month when the ONS published its preliminary estimate of third-quarter GDP.
UK manufacturing output has fallen in three consecutive quarters.
GDP growth in the third quarter was driven by the services sector, which increased output by 0.7 per cent.
At 5pm yesterday, the pound was trading around $1.5038, down more than three-quarters of a cent on its close in London on Thursday.
Sterling also lost ground against the euro. The single currency was trading around 70.44p, up from 70.16p at Thursday’s close.
Confirmation of the slowdown in UK growth reinforced a view among economists that the Bank of England would not be rushing to push up base rates from their record low of 0.5 per cent, where they have been since March 2009.
Howard Archer, chief UK economist at consultancy IHS Global Insight, said: “Confirmation of reduced GDP growth of 0.5 per cent quarter-on-quarter in the third quarter reinforces our belief that the Bank of England is unlikely to raise interest rates before the second quarter of 2016. However, we do expect the Bank of England will act before mid-2016.”
Scott Bowman, UK economist at consultancy Capital Economics, said: “The big news…was that net trade subtracted a massive 1.5 percentage points from quarterly growth – the most on record. This more than offset the positive…contribution in Q2. While net trade is a very volatile component of GDP…trade has provided a negative annual contribution. This shows that growth continues to be driven by domestic demand and trade is not providing much support.”
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