Output down as British economy turns sluggish
A tough summer for industrial-based firms was blamed today for the British economy’s weakest quarter of growth since early last year.
Gross domestic product is estimated to have grown by 0.4% in the three months to the end of September – down on the 0.9% seen in the second quarter and short of City expectations. The year-on-year rate was 3%, compared with 3.6% reported in the second quarter.
The lacklustre quarterly performance reflected a 1.1% drop in the volume of output in production industries as companies faced up to sky-high oil prices, higher interest rates and weak demand from overseas customers.
The latest figures, which can still be revised by the Office for National Statistics (ONS), led analysts to scale back forecasts for growth in 2004.
David Page, of Investec Securities, is now looking for a figure in the region of 3.3%, compared with hopes of 3.5% prior to today and 3.6% earlier in the year.
He believed the data would encourage the Bank of England’s Monetary Policy Committee (MPC) to sit tight and keep interest rates at 4.75% next month.
He added: “It’s unlikely we will see another change in rates this year. There’s too much uncertainty and so the MPC will want to take their time.”
The GDP data signals the re-emergence of a two-tier economy in the UK as, while the manufacturing recovery showed signs of stalling, the consumer side remained resilient – as shown by above-trend growth in the service sector of 0.8%.
