Schroders' European Economist, Azad Zangana, comments on today's UK GDP figures:
“Preliminary estimates of UK GDP growth for between July and September showed the economy grew by 0.8% compared to the previous three months – a slight pickup from the 0.7% growth rate recorded in the second quarter. Compared to the same three months a year earlier, economic activity has growth by 1.5%, the fastest annual pace of growth since the first quarter of 2011. The latest figures came as no surprise to economists, matching the consensus; however, they are significantly weaker than the reports of activity coming from private business surveys.
“Within the details, output increased in all of the four main industrial groupings. The largest contribution came from the services sector (0.57 percentage points), followed by construction (0.15), production (0.06), and finally agriculture (0.01).
“Overall, economic activity appears to be broadening out, although we have no details yet on the expenditure drivers. We suspect the UK is enjoying a rebound in the inventory cycle, and that final demand (consumption, investment, government spending and net trade) will be lower than the 0.8% growth figure. We do expect a slight pull back in the growth rate in coming months, however, the surge in housing activity, and the housing related consumption we expect to follow should keep the UK growing at a steady pace through 2014. All eyes will now turn to the Bank of England which needs to provide an update on its forward guidance on interest rates. Due to the unemployment rate falling somewhat faster than expected, the Bank may bring forward its own forecast of when the Bank may start considering an increase in interest rates.”
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