Real GDP Growth Slows in United Kingdom

Real gross domestic product (GDP) in the United Kingdom fell below the expectations of many analysts during the third quarter, as it grew only 0.5% compared with 0.7% growth the previous quarter, according to a new Wells Fargo report.

Data, however, show that services output accelerated in the third quarter, rising 0.7% on a sequential basis. “The robust growth in services output we have seen in recent quarters has coincided with the continued upward trend in retail sales growth,” the report states. “In that regard, real personal consumption expenditures likely grew at a healthy clip in Q3.”

Despite some growth, manufacturing output contracted for the third-consecutive quarter and construction output saw an even sharper fall. Yet, mining output grew at 2.4% despite declines in commodity prices.

In addition, the Bank of England’s (BoE) Monetary Policy Committee (MCP) voted to maintain the 0.5% bank rate. One of the 10 committee members disagreed and wanted to increase the bank rate “in light of accelerating wage costs and fears that inflation would subsequently overshoot the BoE’s 2% target.”

Analysts at Wells Fargo, however, stated that rising wage costs have not shown signs of increasing the country’s general price levels. While overall inflation in the UK is negative, the core rate also remains subdued. “We believe the MPC is unlikely to sanction a rise in the bank rate at its meeting next week,” the report notes. “However, if the domestic recovery continues to advance at a respectable pace, inflation should start to move back toward 2% over the ‘medium term.’ We currently expect the MPC to sanction the first rate hike in the first half of 2016.”

- Jennifer Lehman, marketing and communications associate

No comments:

Post a Comment