Digging deeper into UK GDP figures
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DIGGING DEEPER INTO UK GDP FIGURES
The FTSE 100 .FTSE is up 0.1% today, faring better than the broader STOXX 600 .STOXX which is down 0.3%, and this is despite some GDP figures which on the surface look less than promising.
Data on Friday showed Britain's economy unexpectedly slipping by 0.1% in September. But zooming in, there's more than meets the eye to this rather dismal figure.
Danni Hewson, head of financial analysis at AJ Bell, says the latest figures show the new government's honeymoon period has fizzled out, but points out a few bright spots.
"...construction output grew 0.8% over the third quarter, buoyed by infrastructure projects, and there are signs that housebuilding should pick up over the coming months thanks to two interest rate falls and a promise to reform planning, but even amongst housebuilders there is concern that build costs are creeping up," she wrote in a note.
RBC economists also highlight that the data looks a bit better if you dig under the hood.
In fact, what they label "domestic demand" - including private consumption, GFCF (gross fixed capital formation) and government consumption - actually grew by a 0.6% quarter on quarter, a "relatively healthy" outcome according to them.
"Despite a positive contribution of 0.5ppts to quarterly GDP growth it appears that the weakness came primarily from the external sector," write the RBC team, a picture they say is also distorted by movements in non-monetary gold.
UBS economists strike a fairly sanguine tone.
"Today's Q3 GDP clearly shows loss of momentum after strong growth in H1," they write, but say they expect GDP growth to average 1.5% in 2025 as measures announced in the Autumn Budget mostly offset concerns about short-term loss of momentum.
"...we continue to see three key headwinds to growth stemming from tight (but easing) monetary policy, gradual tightening of fiscal policy after the initial front-loaded spending measures and external sector weakness," they say, but ongoing recovery in real incomes is expected to offset these headwinds.
(Lucy Raitano)
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