U.K. Growth Picks Up, Suggesting Economy Avoided Recession in 3Q
October 10 2019 - 5:27AM
Dow Jones News
By Joe Wallace
The U.K. economy steadied over the summer, as a robust expansion
in the dominant service sector offset a deterioration in
manufacturing activity, according to data released Thursday.
The pick-up in growth suggests the U.K. avoided falling into a
recession in the third quarter, after contracting in the second
quarter.
The Office for National Statistics said Thursday that gross
domestic product--a broad measure of the goods and services
produced in an economy--grew at an annualized rate of 1.2% in the
three months through August. Television and film production helped
boost the services sector, which accounts for around 80% of U.K.
output.
But a continued downturn in manufacturing activity offered
further evidence of a global slowdown in factory activity, which is
causing particular pain in open economies such as the U.K. and
Germany. Overall manufacturing output dropped by 1.7% from a year
earlier in August, the ONS said, and 10 out of 13 manufacturing
industries declined from July.
The data, released three weeks before the government plans to
pull the U.K. out of the European Union, show the U.K. economy
weathered rising political uncertainty over the summer months. That
uncertainty has increased in recent weeks, as Prime Minister Boris
Johnson has insisted the U.K. will leave the bloc with or without
an agreement by the end of October, even though lawmakers have
legislated to avoid a disruptive no-deal Brexit.
Officials at the Bank of England are concerned that the lack of
clarity about when and how the U.K. leaves the EU is permanently
hurting the U.K.'s productive capacity.
"For some firms--especially those with operations in more than
one country--the logical response to persistently high uncertainty
in the U.K. is to divert investment, supply chains and business
relationships away from the U.K. to other countries," Michael
Saunders, who sits on the BOE's Monetary Policy Committee, said on
Sept. 27. "That spending may be permanently lost, rather than
simply deferred," he said.
Write to Joe Wallace at joe.wallace@wsj.com
(END) Dow Jones Newswires
October 10, 2019 05:12 ET (09:12 GMT)
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