Third quarter GDP solid but ‘triple dip looms’
The annual rate dropped to -0.1% due to revisions to previous quarters, according to the Office of National Statistics. Commentators were quick to point out despite the solid quarter-on-quarter growth, this was down to temporary factors, such as the boost from the Olympics.
“Evidence is building that activity in the fourth quarter has relapsed,” said Vicky Redwood, chief UK economist at Capital Economics.
“Indeed, with the fading of the Olympic boost likely to weigh on GDP in Q4, the MPC has said that it is braced for a contraction – which is what we expect.”
Redwood added: “A triple dip looms”.
The figures showed household spending up was up 0.6% quarter-on-quarter, the best performance since the second quarter of 2010. Services output was also stronger, showing 1.3% growth on the previous quarter, the best result since the third quarter of 2007.
However, manufacturing output was revised down to growth of 0.9%, from the previously estimate of 1%. Construction was worse than previously thought, with output from the industry falling by 2.6%, revised down from the previously estimated 2.5% drop.
This followed a fall of 3% in the second quarter of 2012.
Dr Howard Archer, chief UK economist at IHS, said the overall figure “markedly overstated” the economy’s underlying performance during the quarter.
“Allowing for the various distortions to GDP in the second and third quarters, the overall impression is that the economy achieved modest underlying growth over the two quarters,” he said.
“The worrying news is that the economy is currently clearly struggling to avoid a renewed GDP dip in the fourth quarter as consumers are pressurised by a move back up in inflation and there is an unwinding of the boost to growth in the third quarter coming from the Olympic Games.”