U.k. economic growth subdued in Q3, economy to continue to lag behind in quarters ahead
Source: FxWire Pro - Commentary / 23 Nov 2017 15:09:43 Eastern Standard Time
The second estimate of U.K. GDP growth figures for the third quarter of this year was not a surprising print. The economy grew 0.4 percent sequentially and 1.5 percent year-on-year, coming in line with the flash estimates.
Private consumption grew 0.6 percent sequentially, from 0.2 percent in the prior quarter. It seems that this pattern was at least partially driven by changes in the new car market, which was suppressed in the second quarter following a rise in Vehicle Exercise Duty, and then rebounded to a certain degree in the third quarter. The average growth in consumption in these two quarters was widely similar to the rate seen in the first quarter of 2017 and the fourth quarter of 2016.
In the meantime, the U.K. budget gave a reminder of the U.K.’s woeful productivity. Today’s figures highlighted that, against a backdrop of intense business uncertainty around Brexit, investment growth continues to be weak. Total investment was up just 0.2 percent sequentially, the slowest rate in nearly two years, leaving it up just 1.8 percent as compared to a year earlier and just around 7 percent higher than its level in the first quarter of 2007.
Meanwhile, trade figures came in line with expectations, with exports dropping 0.7 percent sequentially and imports growing 1.1 percent with net exports negatively contributing 0.5 percentage points to the economic growth.
Overall, while the figures released today affirmed that the rate of GDP growth was slightly faster than the earlier quarters, they were barely encouraging. The U.K. economy, in terms of annual growth, continued to be at the back of the pack among the g7 and nearly all other EU nations.
“And with most other economies seemingly on track to maintain the elevated momentum this quarter and possibly beyond, the UK looks set to continue to lag behind for many quarters to come”, stated Daiwa Capital Markets Research.
At 19:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at -12.0127, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -84.7776. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex
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