MNI DATA ANALYSIS: Q3 GDP Confirmed 0.6% on Robust Consumer>

-UK Q3 Current Account Gap Jumps to Stg26.5bn from Stg20.0bn Q2 

-UK Q3 Savings Ratio down to 3.8% from 4.1% in Q2

By Laurie Laird, Jamie Satchi and Jai Lakhani

     London (MNI) - The UK economy expanded at a fairly brisk pace in 

the third quarter, matching earlier estimates, bolstered by robust wage 

growth and consumer spending. 

     Gross domestic product expanded by 0.6% in the third quarter, 

matching analysts' forecast, unchanged from the outturn reported last 

month. On an annual basis, output rose by 1.5%, matching the previously 

reported gain. 

     However, growth was concentrated in the month of July, with the 

economy slowing sharply in August and September.  Members of the Bank of 

England's Monetary Policy Committee expect growth to moderate to 0.2% in 

the fourth quarter, according to minutes of the MPC earlier this week. 

     Meanwhile, the current account deficit expanded dramatically in the 

third three months of the year, rising to Stg26.522 billion, the biggest 

shortfall since the third quarter of 2016. Analysts forecast a gap of 

Stg22.2 billion, up from a revised Stg19.954 billion in the second 

quarter. 

     That took the shortfall to 4.9% of GDP, up from 3.8% in the second 

quarter, the highest ratio since early 2016. 

     A sharp deterioration in trade deficit did not exert a significant 

adverse effect on the second release of GDP, as the data are balanced to 

output rather than expenditure, according to a National Statistics 

official. 

     Exports rose by 1.1% over the third quarter, while imports rose by 

0.8%. As a result, net trade added 0.1 percentage points to total 

growth, down from 0.8 percentage points in the first published estimate 

of GDP. 

     Business investment fell slightly less dramatically than previously 

reported, slumping by 1.1% in the third quarter, better the 1.2% fall 

reported last month, lopping 0.1 percentage points from total growth.  

That's the third straight decline, the longest stretch of weakness since 

the three quarters ending in the third quarter of 2009. 

     On an annual basis, business investment decreased by 1.8% in the 

third quarter, the biggest fall since the first quarter of 2016. 

     Despite the slowdown in retail sales toward the end of the quarter, 

consumer spending -- which comprises nearly two-thirds of GDP -- 

remained relatively robust through the third quarter.  Household 

consumption increased by 0.5% in the third quarter, matching the 

previously-reported gain, up from 0.4% in the previous three months, 

accounting for 0.3 percentage points of total growth. 

     Compensation of employees accelerated at a brisk clip, rising by 

1.4% in the third quarter, up from 0.8% in the previous period. That's 

the fastest pace since the second quarter of 2017, adding 0.7 percentage 

points to total growth. 

     Rising wages helped lift the savings ratio to 3.8% from an 

upwardly-revised 4.1% in the second quarter.  

     However, on the non-financial account, which includes outlays for 

large capital transactions, net borrowing rose to Stg8.305 billion from 

Stg6.514 billion. That's the eighth straight quarter of net household 

borrowing, the longest stretch since records began in early 1987. 

     Government spending declined by 0.3%, down from the 

originally-reported 0.6% gain, exerting a neutral effect on growth. The 

large revision stems from accounting changes to better align the data 

with the public sector finances. 

     The output components to GDP were revised modestly, with an upgrade 

to services and construction output countering a negative restatement of 

industrial production. 

      The dominant service sector growth expanded by at 0.5% in the 

third quarter, up from the 0.4% gain estimated last month, 

contributing 0.4 percentage points to total growth.  

     Industrial output rose by 0.6% in the second quarter, down from the 

previously-reported 0.8% gain, adding 0.1 percentage points to growth.  

     Manufacturing output climbed back into positive territory, after 

two straight quarters of decline, rising by 0.4%, down from the 

initially-reported 0.6% gain.  However, a downturn in car production may 

pressure the manufacturing sector in the closing months of the year. 

     The construction sector rose by 2.3%, exceeding the 2.1% gain 

reported a month ago, adding 0.1 percentage points to total growth.  

-London bureau: 44 (0) 203 865 3812; email: ukeditorial@marketnews.com

[TOPICS: M$B$$$,MABDS$]