UK growth 'slowest in almost a decade'

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Britain’s economy has grown at the slowest annual rate in almost a decade, according to official figures.

Year-on-year growth in the three months to end-September slowed to 1% from 1.3% in the second quarter, the Office for National Statistics said.

An ONS spokesman said: “Looking at the picture over the last year, growth slowed to its lowest rate in almost a decade”.

But the economy avoided a recession by growing 0.3% in the third quarter.

The economy had shrunk in the second quarter and two quarters of contraction would have signalled a recession.

What happened in the three-month period?

Despite the economy expanding by 0.3% in the third quarter, it was not as fast as the 0.4% forecast by economists, including at the Bank of England.

A statistician at the ONS said GDP grew “steadily” in the third quarter. That was largely as a result of “strong July”.

“Services again led the way, with construction also performing well. Manufacturing failed to grow, as falls in many industries were offset by car production bouncing back following April shutdowns.

“The underlying trade deficit narrowed, mainly due to growing exports of both goods and services.”

What happened in September?

In the month of September, GDP fell by 0.1%, as had been expected.

But the ONS revised down the contraction in August to 0.2% from 0.1%.

It was the growth of 0.3% in July that drove the economy in the whole of the third quarter.

John Hawksworth, chief economist at PwC, said: “The fact that growth was positive in the third quarter was largely due to a strong July.

“Output then fell back in August and September, which points to a lack of momentum in the economy going into the fourth quarter.”

Was Brexit stockpiling important?

The economy had unexpectedly contracted by 0.2% in the second quarter – the March to June period – when Brexit stockpiles were unwound after the first Brexit date of 29 March.

That was the first contract since the fourth quarter of 2012.

But in this latest set of data, there was no evidence of stockpiling ahead of the second Brexit deadline, on 31 October, economists said.

Samuel Tombs, economist at Pantheon Macroeconomics, said he had expected a boost to GDP growth from preparations ahead of the now-abandoned Brexit deadline.

“It possible that stockpiling occurred to a greater extent at the start of the fourth quarter,” he said.

What does it tell us about the economy?

Ruth Gregory, senior UK economist at Capital Economics, said that while the economy avoided a recession in the third quarter, the economy was “pretty soft”.

“The GDP figures suggest that the economy failed to regain much momentum after the the second-quarter contraction.

“While the election is just under five weeks away, clearly this isn’t the good news the government might have hoped for.”

As much as it would be a relief that a formal recession has been avoided, the picture is very sluggish, in keeping with what has been called a “slow puncture” economy.

Growth of 0.3% between July and September is clearly preferable to another quarter of contraction, but still slow by normal historical standards.

Indeed, comparing the third quarter this year with the same period last year, growth of just 1% is the slowest since the aftermath of the financial crisis. It is the weakest two quarters since the financial crisis.

The background is a slower European and world economy reeling from trade wars.

But years of damaged business investment, after the Brexit referendum, are taking their toll on growth.

The latest figures in the month of September showed a contraction of 0.1%. Data has been volatile this year, with car industry shutdowns and two bouts of ultimately unneeded no-deal Brexit stockpiling.

So recession avoided, but this is not the “bounce back” promised by some.