The Office for National Statistics (ONS) of the United Kingdom has said that growth in the manufacturing sector has come to a standstill resulting in a slowdown in the growth of the country’s economy.
The economy clocked a growth rate of 0.4 per cent in the three months leading to October quarter which was slower than the 0.6 per cent achieved in the three months leading up yo September.
The growth in imports was higher than exports which also widened the trade deficit of the country. A slower growth rate for the last three months of the year is also expected by economists.
The growth rate for the three months to September was stronger than expected which preceded the October numbers. The growth in the three months to September was the fastest for the British economy since late 2016 and was driven by increased consumer spending due to an unusual warm summer.
“GDP growth slowed going into the autumn after a strong summer, with a softening in services sector growth mainly due to a fall in car sales,” said Rob Kent-Smith, head of national accounts at the ONS. “This was offset by a strong showing from IT and accountancy.”
“Manufacturing saw no growth at all in the latest three months, mainly due to a decline in the often-erratic pharmaceutical industry,” he added.
“Construction, while slowing slightly, continued its recent solid performance with growth in housebuilding and infrastructure.”
On the three-month rolling measure, there was a 0.3 per cent growth in the services sector which was the slowest since the same figure in the three months to April 2018.
The growth of this sector is critical for the British economy because it accounts for about 80 per cent of the GDP of the UK.
The latest economic growth figures also threw up some negative signs. However, such negative signals were mostly benign as modest economic growth was driven by services such as accountancy.
There was just 0.1 per cent growth in the UK GDP following flat growth in both the months of August and September. The services sector was the only major part of the economy to expand in October which was the first month of the last quarter of the year.
Along with a drop of 0.9 per cent in manufacturing output, there was a 0.6 per cent drop in industrial production. There was also a drop of 0.2 per cent in the output in the construction industry.
The latest growth figures “come on the heels of more up-to-date survey evidence which suggests the economy is approaching stall speed and could even contract as we move into 2019 unless demand revives,” said Chris Williamson, chief business economist at IHS Markit.
In terms of the balance of trade in October, the UK marked a negative as it imported more than it exported despite a weaker pound. The ONS said that in October, the increase in imports was faster than expected at £3.6bn compared to e4xports which rose by just by £1.9bn resulting in the widening of the trade deficit to £3.1bn. A revision of the trade data for September was also done by the ONS which was revised to a deficit of £2.3bn instead of an earlier deficit of £0.1bn.
“The widening in the UK’s trade deficit is a concern and reflects a sharp rise in goods imports,” said Suren Thiru, head of economics at the British Chambers of Commerce (BCC).
“Trading conditions for UK exporters are deteriorating amid moderating global growth and uncertainty over Brexit. Businesses continue to report that the persistent weakness in sterling is hurting as much as its helping, with the weakening currency raising input costs.”
(Adapted from BBC.com)