UK Economy Logs Marginal Growth In October
The UK economy logged just a slight expansion in October as only the service sector registered growth, while supply chain issues dragged down construction and production output.
Gross domestic product grew only 0.1 percent from September, when it expanded 0.6 percent, data from the Office for National Statistics said on Friday. This was also much slower than the 0.4 percent expansion expected by economists.
The government’s recently-imposed “Plan B” COVID-restrictions may reduce GDP by 0.0-0.5 percent in December, Paul Dales an economist at Capital Economics, said. That means there is a very real risk of the economy contracting in December.
“Against that background, we doubt the Bank of England will raise interest rates next Thursday,” the economist added.
In the three months to October, GDP advanced 0.9 percent, mainly reflecting the strong performance of the services sector in September.
In October, services output climbed 0.4 percent and has reached its pre-coronavirus (COVID-19) pandemic level.
Meanwhile, production output contracted unexpectedly by 0.6 percent, with water supply the only sector showing growth. Economists had forecast a marginal growth of 0.1 percent.
Manufacturing remained flat in October, in line with expectations. At the same time, mining and quarrying fell 5.0 percent due to planned maintenance of oil fields taking place earlier in the summer this year.
Reflecting rising input prices and shortage of materials, construction output shrank 1.8 percent in October, following an increase of 1.3 percent in September. This was the largest fall seen in construction since April 2020.
Another report from the ONS showed that the visible trade deficit narrowed to GBP 13.93 billion in October from GBP 14.7 billion in September. The expected shortfall was GBP 14.05 billion.
Exports grew 1.6 percent on month, while imports dropped 0.9 percent in October.
The non-EU trade deficit declined to GBP 8.6 billion from GBP 9.1 billion in the previous month. At the same time, EU trade deficit decreased slightly to GBP 5.3 billion from GBP 5.6 billion.
The trade in services showed a surplus of GBP 11.9 billion compared to a GBP 11.96 billion surplus in September.
As a result, the total trade balance showed a shortfall of GBP 2.03 billion, smaller than the GBP 2.78 billion deficit in September.
The recent uplift in trade with the EU following a difficult start to 2021 is not being sustained, and in October tipped into reverse, William Bain, Head of Trade Policy at the British Chambers of Commerce, said. “This is a warning sign.”
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