The UK's economic slowdown continued in the third quarter as output fell in its production sector, yet some experts believe this does not guarantee a rate cut from the Bank of England in December. Britain's quarterly gross domestic product grew 0.1% in the third quarter, slowing from the 0.5% increase in the prior three-month period, the Office for National Statistics reported.
The latest reading missed the consensus estimate of a 0.2% rise for the quarter. On the other hand, the British economy unexpectedly shrank 0.1% month over month in September, compared with the previous and expected 0.2% growth. Annually, the UK GDP increased 1%, against the market forecast of a 1.1% gain. During the quarter, the construction sector logged the highest output rise of 0.8%, as an increase in new infrastructure work offset a decline in repair and maintenance for private housing.
Meanwhile, the dominant UK service sector saw a marginal 0.1% uptick in output amid gains in the consumer-facing subsectors. In contrast, the British production sector contracted 0.2% in the quarter ended September, mainly due to a decline in the electricity, gas, steam and air conditioning supply, accompanied by no growth in mining and quarrying.
ONS Director of Economic Statistics Liz McKeown noted muted growth in most industries during the latest three-month period. With the latest GDP figures, all eyes are now on the BoE and what the report could mean for the British monetary policy trajectory. However, ING believes that the UK central bank continues to prioritize services inflation in its rate decisions. "We shouldn't overthink the GDP numbers we've been getting recently.
The Bank of England has made it abundantly clear that it's not putting much weight on them," ING stated. "Barring any downside surprises, we think the next move in December is a pause, before another rate cut in February.".