UK growth down to 0.4% for third quarter

Figures published by the Office for National Statistics (ONS) show the economy has grown at a rate of 0.4% in the third quarter this year, more slowly than predicted. The figures account for over 70% of UK economic activity in the key services sector [1].

A Treasury spokesman has said in a statement the figures highlight that risks to the UK economy remained, despite it being “the fastest growing economy in the G7 last year” [1].

This comes after the ONS’s publication of a sharp rise in household debt.

According to Investec Economist Philip Shaw, there will be “even less near-term pressure to raise interest rates”, with a majority of economists forecasting the Bank of England will not raise interest rates until around May 2016 [2].

The ONS has reported Gross Domestic Product (GDP) per head is estimated to have increased by 0.3% between the second and third quarter of 2015. In comparison, between 2013 and 2014, GDP per head increased by 2.1% [3].

The increase in living standards was expected to have grown by a larger amount.

Real household disposable income has increased by 0.5% between the second and third quarter, meaning that consumers would be slightly better off [4].

Britain’s current account deficit remained almost stable from July to September at 3.7%, down from 3.8% in the second quarter, showing a slight improvement in economic recovery [2].

Martin Beck, Senior Economic Adviser to the forecasting group EY ITEM Club has said: “Recent experience suggests that we should not write off 2015 just yet, given the clear tendency for the GDP data to eventually be revised up over subsequent years”. There is still optimism for the remainder of the year [1].

[1] BBC News. ‘UK growth estimate revise down to 0.4% for third quarter’.

[2] Reuters UK. ‘UK growth slowdown takes rate-hike pressure off BoE’.

[3] Forbes. ‘UK GDP growth revised downwards: Less pressure on BoE to raise interest rates’.

[4] ONS. ‘Release: Quarterly National Accounts, Quarter 3 (July to Sept) 2015’