UK progress slows over the summer season
Newsflash: the UK financial system has suffered a summer season slowdown.
GDP rose by simply 0.1% within the July-September quarter, knowledge simply launched by the Workplace for Nationwide Statistics exhibits.
That’s down from the 0.5% progress within the second quarter of the 12 months, and weaker than the 0.2% anticipated.
The scorecard for the Labour govenment’s first quarter in workplace exhibits that the companies sector grew by 0.1%, whereas building grew 0.8%.. however manufacturing fell by 0.2% within the quarter.
Key occasions
Decision: UK falls off the highest of the G7 progress leaderboard
The Decision Basis have calculated that the UK has fallen behind the US for progress to date this 12 months.
They clarify that the UK had the quickest rising financial system within the G7 within the first half of this 12 months, after rising by 1.2% from January to June.
However Britain’s GDP rebound has now “run out of steam”, with at this time’s knowledge displaying GDP slowing to 0.1% within the third quarter of 2024 (one of many weakest charges throughout the G7, as defined here).
Decision say this slowdown places UK progress over the primary three quarters of the 12 months at 1.3%, behind the US (1.9%) however forward of France and Italy (0.8% and 0.4%), with Canada set to remain simply behind the UK based mostly on present forecasts.
Simon Pittaway, senior economist on the Decision Basis, says:
“After bouncing again from recession earlier this 12 months, Britain’s restoration is already operating out of steam. The UK has fallen under the US on the prime of the G7 GDP progress leaderboard, with progress slowing, wage rises shrinking and employment beginning to fall.
“The UK has been a GDP rollercoaster over the previous 12 months, however its medium-term efficiency has been staid and stagnant. Over the previous 5 years, the financial system has shrunk by 0.7 per cent when you account for inhabitants progress.
“This all serves to focus on that the Authorities’s mission to resume robust financial progress is each extraordinarily laborious, and completely mandatory.”
Economist consultants are in broad settlement that price range uncertainty damage progress over the summer season.
Hailey Low, affiliate economist on the Nationwide Institute of Financial and Social Analysis (NIESR), says:
“Right this moment’s Q3 GDP figures, although much less strong than within the first half of the 12 months, replicate the impression of pre-budget uncertainty.
Extra notably, it’s disappointing that the Chancellor didn’t absolutely leverage her landmark price range final month to introduce measures addressing the UK’s low productiveness progress, tackling progress inertia, and stimulating long-term financial progress.”
Lindsay James, funding strategist at Quilter Buyers, blamed ‘gloomy messaging’ from the federal government within the run-up to the price range:
“With the price range now firmly within the rearview mirror and the Chancellor reinvigorating her message of progress with the Mansion Home speech, at this time’s quarterly GDP figures spotlight the malaise the UK nonetheless finds itself in. Regardless of good momentum early this 12 months, progress has stumbled as soon as once more, rising simply 0.1% during the last three months, with September really seeing a contraction.
A lot of this may have been because of the gloomy messaging that was persistent within the run as much as the price range, inflicting customers and companies to pause spending and await what ache was to return.
Right here’s Jeremy Batstone-Carr, European strategist at Raymond James Funding Providers:
“This morning’s knowledge confirms that the tempo of UK financial enlargement slowed within the run-up to Rachel Reeves’ inaugural Finances. As customers and companies waited to listen to the Authorities’s fiscal coverage plans, financial exercise decelerated, though to not a halt. Regardless of weak point in authorities spending and commerce, buoyancy in client spending was adequate to develop the financial system by 0.2% within the third quarter of this 12 months.
Reeves: I’m not glad with these numbers
Chancellor Rachel Reeves says she is “not glad” with today’s GDP figures showing the economy slowed over the summer.
Reeves says:
“Enhancing financial progress is on the coronary heart of every part I’m in search of to realize, which is why I’m not glad with these numbers.
“At my Finances, I took the troublesome selections to repair the foundations and stabilise our public funds.
“Now we’re going to ship progress via funding and reform to create extra jobs and more cash in individuals’s pockets, get the NHS again on its ft, rebuild Britain and safe our borders in a decade of nationwide renewal.”
UK in the direction of backside of G7 progress desk for Q3
Right this moment’s GDP report exhibits that the UK is sitting in the direction of the underside of the G7 for progress over the summer season.
Right here’s how the lacklustre progress of simply 0.1% final quarter compares with different main economies:
Labour have pledged to ship the “highest sustained progress within the G7”; at this time’s knowledge exhibits loads of progress is required…..
Luke Bartholomew, deputy chief economist at funding group abrdn, additionally factors the finger on the price range:
“The financial system was at all times going to sluggish from the famously “gangbusters” pace of the first half of this year, however the extent of the slowdown is a little more pronounced than anticipated.
With exercise progress in September being reported as notably weak, it’s believable that a few of slowing is the results of elevated uncertainty at the moment, as companies and households speculated about doable tax adjustments forward of the Finances. That mentioned, it is usually doable that this simply represents regular month-to-month volatility moderately than something extra basic.
In any regard, the contents of the Finances ended up considerably boosting the expansion and inflation image for 2025, and so in that context these knowledge will in all probability do little to vary the pondering on the Financial institution of England. We proceed to anticipate additional gradual easing, with the subsequent price lower coming early subsequent 12 months.”
CBI: Finances uncertainty in all probability performed ‘large half’ in summer season slowdown
The CBI are blaming the uncertainty round final month’s price range for the slowdown in progress over the summer season.
Ben Jones, CBI Lead Economist says:
“The UK financial system stalled over the third quarter. Uncertainty forward of the Finances in all probability performed an enormous half, with companies broadly reporting a slow-down in determination making. Hopefully this may show to be a blip. We nonetheless anticipate the financial system to return to a path of modest progress within the 12 months forward. However draw back dangers to the outlook have elevated.
“The Finances has set off warning lights for enterprise. The hike in Nationwide Insurance coverage Contributions alongside different will increase to employers’ value base will add to the burden on enterprise. And it’s anticipated to set off a extra cautious strategy to pay, hiring and funding as firms work via what it means for their very own budgets.
Right here’s a chart displaying how the UK financial system fared during the last quarter – shrinking within the second half of final 12 months, earlier than returning to progress in 2024:
ONS: progress was subdued throughout most industries
ONS Director of Financial Statistics Liz McKeown says:
“The financial system grew a bit within the newest quarter general because the latest slowdown in progress continued. Retail and new building work each carried out effectively, partially offset by falls in telecommunications and wholesale. Usually, progress was subdued throughout most industries within the newest quarter.
“In September the financial system shrank a bit. Providers confirmed no progress with a notable enhance in automotive gross sales offset by a sluggish month for IT firms. Manufacturing fell general, pushed by manufacturing, although there was a rise in oil and fuel extraction.”
Economic system shrank in September
The UK financial system ended the summer season on a weak be aware, with GDP contracting in September.
Right this moment’s GDP report exhibits that month-to-month actual GDP is estimated to have fallen by 0.1% in September.
This was largely resulting from declines in manufacturing output and knowledge and communication companies, the ONS says.
Whereas the companies sector stagnated in September, manufacturing output fell by 0.5% within the month, however building output grew by 0.1%.
Actual GDP per head fell in Q3
Disappointingly, the financial system really contracted within the final quarter when you modify for inhabitants adjustments.
Actual GDP per head is estimated to have fallen by 0.1% within the third quarter of 2024, and is flat, in contrast with the identical quarter a 12 months in the past, the ONS says.
That’s one indicator for a rustic’s dwelling customary.
UK progress slows over the summer season
Newsflash: the UK financial system has suffered a summer season slowdown.
GDP rose by simply 0.1% within the July-September quarter, knowledge simply launched by the Workplace for Nationwide Statistics exhibits.
That’s down from the 0.5% progress within the second quarter of the 12 months, and weaker than the 0.2% anticipated.
The scorecard for the Labour govenment’s first quarter in workplace exhibits that the companies sector grew by 0.1%, whereas building grew 0.8%.. however manufacturing fell by 0.2% within the quarter.
We’ve additionally realized in a single day that Japan’s financial system slowed over the summer season.
Japan’s GDP rose by simply over 0.2% in July-September, in accordance with new authorities knowledge that exhibits the financial system grew at an annualised price of 0.9% in Q3.
That’s a slowdown on Q2, when Japan’s financial system grew by round 0.55%.
Though family spending held up within the final quarter, there was a dip in capital spending as companies held again from funding selections. Internet commerce additionally had a unfavorable impression on progress.
Financial institution of England governor says Brexit has undermined UK financial system
Heather Stewart
Brexit has additionally been holding again the UK financial system, the Bank of England governor warned final night time as he urged ministers to “rebuild relations” with the EU.
Talking on the Mansion Home dinner within the Metropolis of London on Thursday night, Andrew Bailey mentioned he took no place on Brexit “per se”, however added: “I do must level out penalties.”
He mentioned Brexit had “weighed” on the financial system, stating particularly the impression of Brexit on the UK’s commerce in items, including:
“It underlines why we should be alert to and welcome alternatives to rebuild relations whereas respecting the choice of the British individuals.”
Keir Starmer’s authorities has pledged to deepen cooperation with the EU, although Brussels has made clear it’s unwilling to carry wide-ranging negotiations on the commerce and cooperation settlement (TCA).
Labour is against re-entering the EU’s single market or customs union. As an alternative, the federal government hopes to win extra modest adjustments comparable to mutual recognition {of professional} {qualifications} and a veterinary settlement that might alleviate the necessity for checks on meals exports.
Introduction: UK GDP report developing
Good morning, and welcome to our rolling protection of enterprise, the monetary markes and the world financial system.
Keir Starmer and Rachel Reeves are about to get their first quarterly progress report since taking workplace, and it’s not anticipated to be glowing.
At 7am GMT the primary estimate of UK GDP for the third quarter of 2024 can be launched, in addition to for September alone.
Economists expect the financial system grew by 0.2% in July-September, a comparatively weak progress price. That might be a slowdown on the 0.5% progress recorded in April-June, and the 0.7% in January-March.
If that occurs, Labour’s gloomy speak since profitable the final election in early July is prone to take another blame. Warnings of a ‘painful’ budget hit confidence amongst each customers and companies, which can have a knock-on impression on spending, and funding selections.
However, Reeves may effectively argue {that a} slow-moving financial system justifies her push for progress – though the additional spending specified by final month’s price range is just anticipated to offer a short-term carry to financial output…
Earlier knowledge have proven that the UK financial system stagnated in June and July – because the restoration from final 12 months’s shallow recession pale – earlier than returning to growth in August.
Sanjay Raja, chief UK economist at Deutsche Financial institution, predicts that the UK financial system moved from a “spring sizzle” to a “summer season simmer”.
After a stable H1-24, UK progress over summer season will doubtless sluggish. We anticipate Q3-24 GDP progress to sluggish to a extra paltry 0.2% quarter-on-quarter.
We see September GDP, which may even be launched as a part of the GDP knowledge dump, rising by 0.2% month-on-month. Dangers are skewed greater on the quarterly print, however decrease on the month-to-month September print, we expect.
The agenda
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7am GMT: First estimate of UK GDP for Q3 2024
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7am GMT: First estimate of UK GDP for September 2024
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7am GMT: UK commerce steadiness for Q3 2024
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8.30am GMT: Hong Kong’s GDP report for Q3 2024
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9.30am GMT: UK productiveness knowledge for Q3 2024
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1.30pm GMT: US retail gross sales for October
