Todays GDP release shows both the economy and manufacturing grew by 1% in the third quarter
Output across manufacturing and the wider economy has made a bit of a come-back, confirming that activity wasn’t lost, just displaced from the previous quarter. This has and should be welcomed; it is a positive development given the disappointing data that we have had in the year so far.
However, we need to take this number in context. The UK’s economic performance has been skewed recently by a series of one-off events, including the Diamond Jubilee in q2 and the Olympic and Paralympic games this quarter. The question we need ask as we interpret this figure is whether this first estimate is enough to signal an improvement in the underlying growth picture.
So what impact did the Olympics and Paralympics have on our figures?
The basic story is that it is difficult to fully quantify the overall impact of the Olympics but evidence suggests a number of components of the output measure of GDP are likely to have been impacted, both positively and negatively.
The largest impact comes from ticket sales, which are estimated to have added around 0.2 percentage points to the preliminary estimate of GDP
Other impacts, which are less easily estimated, could include more employment activity, greater use of accommodation and food and beverage services, more use of transport systems, and changes to shopping patterns.
The good news is that under the one-off events the economy is still growing but will the pace of expansion be maintained into the new year?
Unfortunately survey data, particularly in our major markets, continues to point to difficult trading conditions which make this unlikely, and world-wide economic conditions will continue to pose the most significant challenge for the UKs productive sectors.
While today’s data release provides us with some reasons for cheer, the pressure is still on for the government to be clear about its economic priorities and to set a clear path that will continue to deliver growth in the forthcoming Autumn Statement.
But let’s finish with some positive news
Initial estimates are that manufacturing grew by 1% in q3. Looking in further detail at the early monthly data shows that in September the index of manufacturing grew by 0.4% in contrast to the Manufacturing PMI for September was quite negative.
The rise in manufacturing is a bit of an outlier, particularly when most other sectors are showing contraction – these initial estimates show production in total contracted by 0.8% in September and the services and construction sectors also presented contractions of 0.5% and 1% respectively.