U.K. Q3 Growth Moderates As Expected

26/10/2014 08:00 AST

The U.K. economy grew at a slower pace in the third quarter in the face of rising uncertainty stemming from global economic conditions, preliminary estimates from the Office for National Statistics Office showed Friday.

Gross domestic product climbed 0.7 percent from the second quarter, when it grew 0.9 percent. The sequential growth rate matched economists' expectations.

As expected, GDP was 3 percent higher in the third quarter compared with the same quarter a year ago. GDP was estimated to be 3.4 percent higher than the pre-economic downturn peak of the first quarter of 2008, ONS said.

The production-side approach showed that the dominant service sector expanded 0.7 percent on quarter, slower than the 1.1 percent rise seen in the second quarter.

Meanwhile, growth in production accelerated to 0.5 percent from 0.2 percent. Construction went up 0.8 percent after expanding 0.7 percent. At the same time, farm output gained 0.3 percent, offsetting last quarter's 0.3 percent fall.

Another report today showed that the Index of Services increased by 3.1 percent in August from last year. All of the four main components of the services industries increased compared with the same month a year ago. Services output was flat from July.

"Today's strong growth figures show that the U.K. continues to lead the pack in an increasingly uncertain global economy," Chancellor George Osborne said. "The UK is not immune to weakness in the euro area and instability in global markets."

Though the economy held up pretty well in the third quarter, the slowdown partly reflects the fact that it is not immune to increased global economic uncertainty and weakness in the euro area, IHS Global Insight's Chief U.K. Economist Howard Archer said.

Rob Carnell, an ING Bank NV economist, said if the mixed data continue to roll in, and if the Eurozone shows no signs of renewed growth, this could push back rate hikes, perhaps beyond next year's General Election.

Bank of England Chief Economist Andrew Haldane said last week that the interest rate could remain lower at a record low for a longer period and statistics provides gloomy outlook.

The EY ITEM Club forecast economic growth to ease to 2.4 percent next year from an estimated 3.1 percent in 2014. The think-tank said on Monday that political uncertainty at home and abroad now tops the worry list and is set to dampen business investment.

The International Monetary Fund forecast the U.K. economy to grow 3.2 percent this year and 2.7 percent in 2015.

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