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UK GDP growth slows as production sector contracts

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UK GDP growth slows as production sector contracts

The British economic growth continued to slow in the three months to November 2018, as contraction in the production sector contributed negatively to growth.

Growth in the three months came in at 0.3%, in line with the Econoday estimate, following a 0.4% expansion in the three months to October 2018, data from the Office for National Statistics showed. On a monthly basis, GDP grew by 0.2% in November 2018, higher than 0.1% recorded in the prior month.

"Manufacturing saw a steep decline, with car production and the often-erratic pharmaceutical industry both performing poorly," said Rob Kent-Smith, head of national accounts at the ONS.

The services sector, driven by professional and scientific activities, grew by 0.3% in the three-month period, making it the largest contributor to GDP growth at 0.24 percentage point. The construction sector expanded by 2.1%, while production contracted by 0.8% as all four of its subsectors registered negative growth.

The most recent service sector data points suggest a pronounced slowdown in December 2018, which looks set to persist into the new year amid Brexit uncertainty, according to ING. "We also don't expect pre-Brexit stockpiling to significantly drive up production given the lack of storage capacity for inventories."

Growth looks set to be "noticeably slower" in the fourth quarter of 2018 than the third, ING said, predicting GDP growth at the 0.2%/0.3% region in the final quarter of 2018.

Meanwhile, the U.K.'s total trade deficit contracted by £200 million to £7.9 billion in the three months to November 2018 as exports of goods and services rose more than imports, a separate release from ONS showed.