UK Q3 Initial Reading Published

The third quarter of 2016 provides the first set of economic data purely related to the UK economy after the decision was taken to leave the EU. However, the UK remains a member of the EU with all the trading advantages that affords and whilst the rhetoric clearly suggests that the nation will cede from the EU the enabling declaration has yet to be issued and even then, the nature of a future EU-UK trading relationship has yet to become clear. Consequently, it is difficult to use the data to provide any clear conclusions on the effect of the plebiscite on the UK economy going forward.

The initial reading (of 3) for the UK’s GDP in Q3 came in at a growth figure of 0.5% which was better than the forecasted 0.3%. However, it represents a slowing of growth in the economy over the rate of 0.7% seen in Q2. The dominant service sector performed well, growing at a rate of 0.8%. Within this sector, transport, storage and communication increased by 2.2%. But the devil is usually to be found within the details. Sectors of the UK economy did actually contract during Q3 with construction shrinking by 1.4% and manufacturing output slipping by 1%; industrial production also contracted but by a more modest rate of 0.4%.

It is believed that the falls in the value of Sterling (down by approximately 17% against the Dollar since just before the vote) have given a boost to consumer spending in the UK – not hard pressed Brits, of course, but tourists taking advantage of bargain prices during their stay. A weaker Pound helps make British exports more competitive, but stokes inflation since the nation is a net importer and imports are dearer against a weaker Pound.

In the fullness of time, data will become available about UK inward investment flows and job creation (or redundancies) intentions which may produce a more robust picture of the UK’s economic health moving forward.