-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$]
