United Kingdom: Third quarter growth sustained by rising exports
November 24, 2010
In the third quarter, gross domestic product (GDP) increased 0.8% over the previous quarter in seasonally adjusted terms, according to the second estimate released on 24 November. The reading was unchanged from the first estimate released in October and underscored the strength of the British economic recovery, despite being below the second quarter's higher-than-expected 1.2% expansion. In annual terms, GDP grew 2.8% in the third quarter, up from the 1.7% expansion observed in the second quarter. The slowdown over the previous quarter was the result of weaker growth in the domestic sector. Private consumption slowed to a 0.3% expansion (Q2: +0.7% quarter-on-quarter), while government consumption decelerated to a 0.4% increase (Q2: +1.0% qoq). Furthermore, fixed investment moderated and expanded by 0.6% (Q2: +1.4% qoq). Exports continued to recover at a solid pace, increasing 2.2% in the third quarter (Q2: +2.3% qoq). In contrast, imports decelerated markedly, down from a 2.4% expansion in the second quarter to a 0.7% increase in the third quarter. As a result, the net contribution of the external sector to overall growth swung from minus 0.1 percentage points in the second quarter to 0.4 percentage points in the third quarter. At the sectors level, the second estimates were broadly unchanged from the first estimates. Most notably, the construction sector slowed to a 4.0% expansion (Q2: +9.5% qoq), while agriculture contracted 0.4% (Q2: +2.7% qoq). The industrial sector also contributed to the quarterly deceleration, as growth softened to a 0.6% expansion (Q2: +1.0% qoq). Finally, the all-important services sector, which represents nearly three quarters of the total economy, grew at a rate of 0.6%, the same pace of that witnessed in the previous quarter. Despite the better-than-expected recovery, growth is likely to moderate going forward as the fiscal austerity measures, along with a stronger pound, begin to drag on growth.