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UK economy rebounds in summer months

Oct 16 2018, 06:25 PM (+06) | Orbex.com

Summary:

  • GDP flat on the month in August. GDP advances 0.7% in the three months to August

  • Manufacturing production falls 0.2%, posting the second month of decline

  • Industrial output rises 0.2% on the month

  • Construction output falls 0.7%

Economic growth in the United Kingdom was seen picking up the pace in the summer months. The gains came as they were aided by a stronger retail sales report and an improved homebuilding activity. The response was due to the warmer than usual weather pattern which helped the economy to chug along.

The UK's Office for National Statistics said on Wednesday last week that the economic output in the three months to August was 0.7% higher compared to the previous period. On an annualized basis, the UK's gross domestic product was seen rising 2.8%.

On a month over month basis, the GDP was flat, missing estimates of a 0.1% increase.

The ONS said that it now raises its estimates for growth in the three months to July to 0.7% from 0.6%. The UK's economy was seen rising at the fastest pace since February 2017. Growth had initially slowed, especially in the first quarter. The UK's economy was on the brink of dipping into a recession. This also led the Bank of England officials to postpone the proposed rate hike in May to August.

Despite the upbeat figure, there were signs that the UK's economy was losing its momentum toward the end of the period. Output was seen to have been flat in August compared to the month before.

Still, the economy was seen to have been progressing since the sluggish start at the beginning of this year.

Ron Kent-Smith, a statistician with the UK's Office for National Statistics, said that the UK economy rebounded strongly after a weak spring. Retail sales including food and drink production and homebuilding activity were seen to be performing particularly well.

The Bank of England has hiked interest rates twice so far since November 2017. However, economists expect to see limited rate hikes in the coming years. This is expected in the backdrop of the Brexit negotiations and the current pace of growth.

At the time of writing, the UK's GDP growth rate is one of the lowest among the G7 economies. The Bank of England officials, however, said that monetary policy would be affected with the way the UK negotiates its Brexit deal. The United Kingdom is expected to start its exit process from March 2019. So far, no concrete agreement has been proposed.

Data last week also showed that the UK's trade deficit with the rest of the world widened. This means that the UK imported more goods and services than its exports with its global trading partners.

Official data from the ONS showed that the goods trade deficit increased to 11.2 billion GBP. This was higher compared to July's trade deficit of 10.4 billion GBP.

In the three months to August, the trade deficit was however seen to have slightly narrowed as goods deficit declined and there was a surplus in the services sector.

Despite the figures, the UK's economy continued to show uncertainty with weak patches.

Manufacturing production data released showed that output was 0.2% lower in August compared to July. This was a second straight month of decline. Output in some sectors such as mining and quarrying and oil and gas sectors rose in August.

Industrial production, on the whole, rose 0.2% on the month. In the three months to August, industrial production advanced 0.7%. Construction output fell 0.7% on the month. This was bigger than the estimated declines of 0.4%. The month before, construction output advanced 0.5%.

The construction sector continues to remain uncertain with patches of decent and weak growth.

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