UK economic growth expected to have slowed in fourth quarter
UK economic growth is expected to have slowed in the final quarter of last year but economists warned against viewing the data as a sign the UK is headed for recession.
Economists believe that gross domestic product (GDP) growth slowed to 0.3% in the three months to December.
It comes after growth cooled off in the three months to November, rising 0.3% compared to the previous quarter. Growth of 0.4% was recorded in the three months to October.
The third quarter of 2018 saw GDP rise by 0.6%, reflecting strong retail sales during the World Cup and a recovery in construction activity.
Month-on-month growth for December is forecast to be flat.
Growth was likely impacted by some short-term factors, such as the seasonal effect of Black Friday on retailers.
Samuel Tombs, chief economist at Pantheon Macroeconomics, said: “All told, December’s GDP report will look poor, but with most of the weakness reflecting temporary disruption in the retail and industrial sectors, it should not be taken as a signal that the economy is sliding into recession.”
The industrial sector is expected to weigh on Britain’s economic growth, despite production hitting a seven-month high in December.
The official PMI calculation includes buying volumes, which rose as companies stockpiled parts ahead of a possible no-deal Brexit.
With this stripped out, the output index fell in December, pointing to a broader trend of flatlining growth in the sector.
December car production also dipped, with the Society of Motor Manufacturers and Traders (SMMT) recording a decline of 0.3%.
Meanwhile output from the oil and gas sector was held back by the closure of the Buzzard oil field, which accounts for about 13% of total UK oil production.
Analysts at The Share Centre said: “These sets of data will almost certainly have Brexit flavour to them with expectations that all the uncertainty and withholding of investment spending left the fourth quarter growth rate at half of that during the third quarter and the year-on-year figure moderating to 1.4%.”
The Bank of England also expects growth to be slower in the fourth quarter, estimating that growth will fall quarter-on-quarter to 0.3%.
The central bank’s Monetary Policy Committee (MPC) lowered expectations for economic growth when announcing its interest rate decision this month, cutting 2019’s growth forecast to 1.2% – the lowest since 2009, when the economy was in a recession following the financial crisis.
Its shock downgrade compares with 1.7% predicted in November while the Bank also cut its outlook for 2020 to 1.5%.