The UK economy grew less than previously estimated in the third quarter, lagging behind other advanced countries, according to official data.
Output grew 1.1 per cent in the three months to September compared with the previous quarter, lower than the 1.3 per cent initially estimated, data from the Office for National Statistics showed on Wednesday.
“Our revised figures show UK GDP recovered a little slower in the third quarter, with much weaker performances from health and hairdressers,” said Darren Morgan, director of economic statistics at the ONS, with “the energy sector contracting more in September than we previously estimated”.
The decline in output compared with the final quarter of 2019, before the pandemic, was revised to 1.5 per cent, smaller than the 2.1 per cent expected because of upward revisions to growth in 2020.
However, overall, the UK economy took a bigger hit than other advanced economies. Over the same period, growth in the eurozone nearly recovered to its pre-pandemic level, while output in the US and China has already exceeded it.
The downward revision in electricity and gas contributed to a drop in output in production industries, including manufacturing, utilities and mining. Output in these sectors fell 0.1 per cent over the third quarter, down from previous estimates of a 0.8 per cent expansion.
Business investment shrank 2.5 per cent in the third quarter, according to official estimates, pushing it nearly 12 per cent below pre-pandemic levels, by far the worst record of any major advanced economy.
Tony Russell, chief growth officer at Proteus, a consultancy, said that with business investment hardly growing since 2016, “the UK’s corporate ecosystem is not just falling behind but undermining its future growth potential”.
UK trade performance was also revised down with net trade likely to “continue to be a drag in 2022”, according to Gabriella Dickens, economist at Pantheon Macroeconomics, as British manufacturers were “slowly cut out of global supply chains, due to Brexit”.
Household consumption was the main driver of growth in the third quarter, with levels registered at 2.7 per cent, driven by stronger spending in restaurants.
The data showed that “consumer spending patterns started to return to normal”, said Thomas Pugh, economist at the tax consulting company RSM UK, as people bought fewer goods. Meanwhile, spending on services rose, which could help ease continuing pressure on supply chains.
The household saving ratio — the average percentage of disposable income that is saved — fell to 8.6 per cent in the third quarter from 10.7 per cent in the previous three months.
Household saving also fell to their lowest level since the pandemic began and “suggested that consumer behaviour was increasingly normalising prior to the emergence of [the] Omicron [variant]”, said Martin Beck, adviser at the consultancy EY Item Club.
However, Pugh said that Omicron is now “dominating the economic outlook” with GDP expected to be about 1 per cent lower in January compared with November.
“Even if there are no further restrictions, Omicron will create a slump in output in the restaurants and hotels sector and the recreation sector through December and January,” he said.
Source: Economy - ft.com
