United Kingdom GDP Q2 2016

United Kingdom

United Kingdom: Growth confirmed at 0.5% in Q3

December 5, 2016

A full set of GDP data covering the three months up to September show that the British economy slowed slightly in the immediate aftermath of the Brexit referendum. GDP expanded 0.5% on a sequential basis, thus mirroring the preliminary estimate and coming in below the 0.7% increase observed in the second quarter. Q3’s increase was in line with market expectations. The slowdown was due to a deceleration in domestic demand, while the external side of the economy performed better compared to the previous quarter.

Private consumption expanded a weak 0.6% in Q3, which was below the 0.9% increase seen in the second quarter. Moreover, growth in fixed investment slowed from a 1.6% in Q2 to 1.1% in Q3. On the contrary, government consumption improved from Q2’s flat reading and expanded 0.4% on a sequential basis.

On the external side, demand for the UK’s exports improved, helped by a weaker pound. The net contribution of trade to overall growth swung from minus 0.8 percentage points in the second quarter to plus 0.7 percentage points in the third quarter. This was due to a better performance of exports, which increased 0.7%. Moreover, imports deteriorated and contracted 1.5% in Q3, which contrasted the 1.3% increase seen in the previous quarter.

The economy expanded 2.3% in Q3 compared to the same quarter of last year, which mirrored the preliminary release and marked an acceleration over the previous quarter’s 2.1% increase. The figure was the fastest increase in over a year.

The Central Bank expects the economy to expand 2.2% this year and 1.4% in 2017. This month, FocusEconomics’ panelists have upgraded their GDP forecast for 2016 and the Consensus Forecast now foresees 1.9% growth—up 0.1 percentage points from last month’s estimate. The Consensus Forecast shows GDP expanding 0.9% in 2017, which is up 0.2 percentage points from last month’s estimate.

Author:, Senior Economist

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United Kingdom GDP Chart

United Kingdom GDP Q3 2016 0

Note: Quarter-on-quarter changes of seasonally adjusted GDP and year-on-year variation in %.
Source: Office for National Statistics (ONS) and FocusEconomics Consensus Forecast.

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