NIESR Monthly GDP Tracker – Economic growth resumes for now
Figure 1 – UK GDP growth (3 months on previous 3 months, per cent)
- The UK economy is on course to grow by 0.3 per cent in the third quarter of 2019, a resumption of growth after a 0.2 per cent fall in the second quarter when production had slackened after being boosted in the first quarter by stockbuilding ahead of the original Brexit departure date (figure 1).
- According to new ONS statistics published this morning, the UK economy was flat in the three months to July. The stagnation in output in the three months to July was associated with an above-expectations 0.3 per cent increase in GDP in the month of July, driven primarily by an increase in output in the services sector.
- Recent surveys suggest that output was flat in August, with service sector expansion being offset by contractions in manufacturing and construction. If these trends continue, GDP will grow by around 0.3 per cent in the third quarter (figure 1). This is higher than the 0.2 per cent growth that we had pencilled in last month.
Dr Garry Young, Director of Macroeconomic Modelling and Forecasting, said: “It looks like there has been a welcome resumption of economic growth in the third quarter, roughly offsetting the fall in the second quarter. But it is not clear how long growth will continue. Only the services sector is expanding, primarily to meet higher demand from consumers driven by increased household incomes fuelled by rising real wages. But there is a limit to how much further real wages can grow without a pick-up in investment and productivity, and this seems unlikely in the near term.”
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