Economy loses momentum

published 29 October 2015

766-builder-634 — Construction is "notoriously volatile"

Preliminaryfigures from the Office for National Statistics (ONS) suggest the UK's economic recovery may have lost momentum in the third quarter of the year. GDP is estimated to have grown by 0.5% between July and September, compared to growth of 0.7% in the previous quarter. The service sector continued to lead the way, expanding by 0.7%. Construction was a large drag on growth, by 2.2%.

What the commentators said

However, the strong pound, coupled with the slowdown of the global economy, "make exporting UK made goods expensive and difficult", said Larry Elliott in The Guardian. Meanwhile, low interest rates "make borrowing for consumption and speculation in financial assets cheap". The economy has lapsed back into a pattern where the service sector is strong and manufacturing is weak. "As was the case in the years leading up to the deep recession of 2008-2009, the economy is heavily reliant on the City and consumer spending."

The good news is that "real GDP is now 6.4% higher than the pre-recession peak in early 2008", said David Kern, chief economist at the British Chambers of Commerce, quoted in The Guardian. Nonetheless, we need further measures to support the recovery and boost growth, "with particular emphasis on exports and infrastructure investments. Fixing the fundamentals will place the economy on a surer footing".

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Overall, though, this does not look like the start of a "more serious slowdown", said Capital Economics. There are obstacles to overcome in the coming quarters, including uncertainty over the referendum on leaving the European Union and a renewed fiscal squeeze. Hence growth next year is unlikely to be spectacular. But there is a good chance that it will bounce back in 2017.

Marina has a PhD in globalisation and the media from the London School of Economics, where she worked as a teaching assistant on the MSc Global Media. In 2014 she was invited to be a visiting scholar at Columbia University's sociology department in New York.

She has written for the Economists’ Intelligent Life magazine, the Financial Times, the Times Literary Supplement, and Standpoint magazine in the UK; the New York Observer in the US; and die Bild and Frankfurter Rundschau in Germany. She is trilingual and lives in London. She writes features and is the markets editor at MoneyWeek..