Better balanced growth takes a holiday in q3

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The Office for National Statistics had already pencilled in growth of 0.7% in the three months to September in their first estimate of GDP and that hasn’t changed in their second tranche of data.

Today’s statistics show that the economy has expanded by 3% over the past year and manufacturing output is up 3.4% over the same period.

Balanced growth – where art thou?

As ever with more detailed data from ONS there’s a but…. While household and government spending were both positive contributors to growth, net trade and business investment were pulling in the other direction.

Business investment dipped slightly in the third quarter (down 0.7% compared with q2), but given its recent strong run of growth and positive firm level intentions being reported in surveys, I’d argue this isn’t yet a major cause for concern.

gdp14q3

Net trade on the other hand, subtracted almost half a percentage point from GDP growth in 2014q3. This was mainly down to a jump in imports, but the value of exports has fallen in four out of the past six quarters. Much of this is down to a pretty dismal performance from goods sectors, but services exports have barely moved in the past couple of year either.

The main message for the UK remains, any growth is good, but trade and investment driven growth would still be a lot more desirable and policy makers must be focused on turning this ambition into a reality.

Still on track for 3%

Another quarter of growth of this kind of magnitude will see UK GDP grow by 3% over the year as a whole. The fastest pace of increase since 2006 and (as we are continually reminded), the best performance in the G7.

On Monday, we’ll be releasing EEF’s Business Trends Survey covering trends in manufacturing in the final three months of 2014 and what we might expect at the start of 2015.

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Chief Economist

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