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Investors urged not to panic as UK economic growth slows

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27/10/2015
UK economic growth slowed in the third quarter due to weaker construction and manufacturing output but investors have been urged not to panic.

Figures from the Office for National Statistics (ONS) showed 0.5% GDP growth in the July-to-September period, down from 0.7% in the previous quarter.

Manufacturing output declined 0.3% in the quarter and construction was down by 2.2%.

This figure came as a surprise to the market as it was worse than the 0.6% figure expected and a 0.2% fall on the previous quarter.

However, Ian Forrest, investment research analyst at The Share Centre, said the level of growth was “relatively good”.

He said: “The UK economy looks like it has been losing momentum, hindered by China’s downturn, a construction slump and ailing manufacturers. However, recent figures including retail sales figures, have beat expectations.

“Therefore, despite the market’s disappointment this morning, investors should acknowledge that this level of growth is still relatively good and the weakness appears to be mainly in manufacturing which is not unexpected.”

The manufacturing sector, which represents 10% of the UK economy, is battling twin headwinds of a stronger pound and weaker demand from abroad as the global economy falters.

Ben Brettell, senior economist at Hargreaves Lansdown, said: “The Bank of England remains confident the UK economy will remain healthy in the final quarter of the year, with wages and productivity both making good progress. Furthermore, monthly data has been a little better in September than in the two previous months, which could signpost a stronger end to the year. Overall the domestic economy looks in reasonable health, with growth solid (if unspectacular), employment at an all-time high and inflation low. However, the global outlook is undoubtedly darker and this could act as a brake on growth over the next few quarters.”

The largest contribution to the increase in GDP in quarter three came from the services sector, according to the ONS findings. Services grew by 0.7%, while production increased by 0.3% and agriculture by 0.5%.

This is the first estimate of GDP based on less than half of the data which will ultimately be available. Revisions to today’s figures are likely in the coming months.

 

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