2019.11.1110:49:00UTC+00UK Dodges Recession In Q3

The UK economy avoided a recession in the third quarter, helped by services and construction, but the pace of overall expansion was weaker than expected, data from the Office for National Statistics showed Monday.

Gross domestic product grew 0.3 percent sequentially in the third quarter after contracting 0.2 percent in the previous three months.

Nonetheless, this was weaker than the consensus of 0.4 percent. The Bank of England had projected 0.4 percent growth for the third quarter.

On a yearly basis, GDP advanced 1 percent, the slowest pace since the first quarter of 2010.

The dominant services sector grew by 0.4 percent driven by the strength in July. The main contributor to growth was information and communication.

Construction grew 0.6 percent in the third quarter on higher private housing.

Meanwhile, both production and manufacturing remained flat, and farm output contracted 0.2 percent.

The ONS also released the monthly GDP figures for September.

GDP decreased 0.1 percent in September as industrial production shrank 0.3 percent, largely reflecting the weakness in the pharmaceutical sector. Construction fell 0.2 percent, while the services output remained unchanged on month in September.

According to the expenditure-side breakdown, private spending, government consumption and net trade contributed positively to growth, while gross capital formation subtracted from GDP growth in the third quarter.

Household spending increased 0.4 percent, while gross fixed capital formation dropped 0.2 percent.

The total trade deficit narrowed by GBP 5 billion to GBP 6.4 billion in the third quarter, largely because of rising exports. The visible trade deficit decreased by GBP 1 billion to GBP 33.2 billion.

In September, the visible trade deficit widened to a five-month high of GBP 12.541 billion, which was bigger than the forecast of GBP 10.000 billion.

On a month-on-month basis, merchandise exports rebounded with 1.2 percent growth in September and imports rose 5.1 percent. The total trade deficit widened to GBP 3.36 billion from GBP 1.76 billion in the previous month.

There wasn't much evidence of activity being brought forward ahead of the previous October 31 Brexit deadline, Ruth Gregory an economist at Capital Economics, said.

Further weakness is likely to be in store in the fourth quarter, the economist said.

Unless Brexit uncertainty fades and a fiscal boost is forthcoming, then this might make the Bank of England more inclined to cut interest rates before long, Gregory noted.