2019.10.1005:41:00UTC+00UK GDP Expands On Services Growth

The UK economy expanded in three months to August for the second consecutive time suggesting that it is on the course to avoid a recession ahead of Brexit.

Rolling three-month gross domestic product growth increased to 0.3 percent from 0.1 percent in three months to July, data published by the Office for National Statistics showed Thursday. This was also faster than the expected 0.1 percent rise.

However, monthly GDP fell 0.1 percent in contrast to July's 0.4 percent expansion. GDP was forecast to remain flat in August.

"Growth increased in the latest three months, despite a weak performance across manufacturing, with TV and film production helping to boost the services sector," ONS Head of GDP Rob Kent-Smith said.

Services and construction expanded 0.4 percent and 0.1 percent, respectively in three months to August. Partially offsetting these increases, industrial output dropped 0.4 percent.

The economy will most likely avoid a near-term technical recession, ING economist James Smith, said. But even so, economic growth is likely to remain fairly moderate for the rest of this year, averaging around 0.2-0.3 percent per quarter.

This means that the Bank of England is likely to remain cautious, although its probably too early to be pencilling in UK rate cuts, the economist added.

In August, growth in services was flat as expected, following growth of 0.3 percent in July and 0.2 percent in June.

Meanwhile, industrial production declined 0.6 percent on month largely reflecting a 0.7 percent unexpected fall in manufacturing.

Economists had forecast industrial output to remain flat after rising 0.1 percent in July. Manufacturing output growth was expected to halve to 0.2 percent from 0.4 percent.

Construction output advanced 0.2 percent driven by a 1.1 percent rise in repair and maintenance work. Nonetheless, the pace of growth slowed from 1.8 percent seen in July.

On a yearly basis, industrial production decreased 1.8 percent after easing 1.1 percent in July. Likewise, the decline in manufacturing output deepened to 1.7 percent from 0.9 percent.

Another report showed that the visible trade deficit of the nation widened to GBP 9.8 billion in August from GBP 9.62 billion in July. Exports of goods dropped 0.5 percent, while imports gained 0.1 percent.

Nonetheless, the total trade deficit decreased to GBP 1.55 billion from GBP 1.68 billion in July.