UK activity in Q3 points to a 0.4% GDP growth rate

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The UK’s economy was seen to have managed to keep its steady but soft pace of growth in the third quarter. Data from the IHS Markit covering the manufacturing, services and construction sectors showed.

However, the uncertainty in the businesses hit a high as the UK prepares to leave the European Union in six months time. With no trade deal yet in sight and both parties at odds, the risks of a no-Brexit deal remain real.


Manufacturing activity rebounds in September

The manufacturing sector in the UK posted a modest rebound during the month which came as a surprise. The manufacturing PMI was seen at 53.8, rising a full point compared to 52.8 in August.

The data beat estimates of a decline to 52.5.

Data showed that output and new orders accelerated during the month. There was also a noticeable increase in input costs and new orders growth.

Rob Dobson from Markit commented, “September saw a mild improvement in the performance of the UK manufacturing sector. Domestic market demand strengthened, while increased orders from North America and Europe helped new export business stage a modest recovery from the contraction in August. Business confidence also rose to a three month high.”

Construction PMI falls to a six month low

Activity in the construction sector showed that it slowed to the weakest level in six months. The data for September showed that construction activity fell to 52.1 during the month. This was down from the previous reading of 52.9 in August.

Civil engineering was the worst performing sub-category dragging the index lower. The declines came at a faster than expected pace. Activity in house building and commercial construction were seen rising at a solid pace.

Construction output pointed to a modestly faster pace of increase with new business volumes rising. New orders growth also posted a steady pace of increase since December 2016 for September. Firms attributed this increase due to an upturn in demand for new tender invitations.

Staffing and employment in the construction sector were also seen to have increased. This came as a result of an increase in the new orders. The pace of increase in the employment for the services sector was the fastest since December 2015.

Services sector eases to 53.9

Data from IHS Markit showed that the services PMI slipped to 53.9 in September. This was weaker than the reading in August which showed a print of 54.3. The data was also slightly weaker than the median forecasts of 54.0.

Brexit continues to remain a risk. GDP forecast at 0.4% for Q3

IHS Markit said that the UK’s economy was on track to grow at a quarterly rate of just around 0.4% in the three months ending September. The forecast marks the same pace of average growth since the UK’s vote to leave the EU in June 2016.

Business optimism was, however, higher in September. Concerns about Brexit were seen to kept confidence in check.

The UK, which is the world’s fifth largest economy continued to suffer after a slow start to the year. Harsh winter conditions hit the economy. Activity, however, managed to pick since the second quarter, fuelled by consumer spending instead of trade or manufacturing.

The data puts little pressure on the Bank of England to raise rates again. The BoE had hiked interest rates for the second time after rates fell to historic lows of 0.25%. The current interest rate stands at 0.75%. Economists do not forecast further rate hikes until the March 2019 Brexit deadline.

The recent data also showed that the UK’s economy remains far away from showing any signs of overheating. Growth is expected to slow even more if the Brexit negotiations do not end amicably.

The UK and the EU are still expected to negotiate a trade deal that could help the UK to leave the EU with good trade terms.



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