Each weekend The Saturday Economist John Ashcroft delivers a round up of the week’s economic news. In Saturday’s edition edition John takes a look at the state of economic growth in Q3.
The preliminary estimate of growth of 1.5% in the third quarter will offer little comfort to the Government as growth remained unchanged from the second quarter and down on the first quarter of the year (1.8%).
Good news in manufacturing and construction. Manufacturing growth was up by 2.7% and construction growth increased by 2.8%. Service sector growth slowed to 1.5%, with a pronounced weakness in transport and business services. Based on the latest data, we now expect growth of around 1.6% this year, compared to 1.8% in 2016. Will this be enough to push rates higher next month? It will be a close call, the Governor may decide to wait and see once again.
The latest data from the SMMT on car production are of concern. Output fell by 4% in September and by 2.2% in the year to date. Manufacturing output for the home market was down by 14% in the month. Worries about toxic fumes from Brexit and diesel, are fueling concerns for domestic buyers and producers.
Over in the U.S.A. the latest figures led to headline talk of 3% growth in the third quarter. It is misleading. The quarterly growth rate annualised is the process. The year on year comparison is the more realistic and less volatile guide. Year on year the growth rate in the third quarter is 2.3%. Up from 2.2% in the second quarter and 1.8% last year. The economy offers steady growth, which will lead to a slow rate rise process. The possible injection of a huge tax cut planned by Trump may lead to higher short term growth but will weaken the dollar, accelerate inflation and lead to a higher trade deficit, in due course, assuming it gets over The Hill …
Expert Opinion on the UK economy from John Ashcroft, Chief Executive of pro-manchester and a visiting professor at MMU Business School.