Europe News

UK economy loses steam in third quarter

The U.K. economy grew less than expected in the third quarter, according to preliminary estimates from the Office of National Statistics (ONS).

The U.K.'s gross domestic product (GDP) grew by 0.5 percent percent in the three months from July to September, missing expectations for a 0.6 percent expansion. In the second quarter of 2015, the economy expanded 0.7 percent.

Year on year, the economy grew 2.3 percent, the lowest rate of growth since the third quarter of 2013.

Number 20 Fenchurch Street in the financial district is London's newest skyscraper and is known as The Walkie Talkie. The Sky Garden sits at the top of the building, with two erstaurants and a bar, and is Londons highest public garden.
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The ONS said growth increased in three of the main industrial groupings of the economy. Services increased by 0.7 percent, production increased by 0.3 percent and agriculture increased by 0.5 percent. In contrast, construction growth decreased by 2.2 percent.

Whether the data is enough to prompt the Bank of England's rate-setting committee to increase interest rates sooner rather than later is uncertain, however.

Inflation is still far from the bank's target of 2 percent (in fact, consumer prices fell by 0.1 percent in September) meaning that the bank could keep interest rates lower for longer in a bid to increase spending.

Sterling fell against the dollar following the release of the data.

Analysts said the data could mark the beginning of a more prolonged slowdown.

Chris Williamson, chief economist at Markit which compiles monthly purchasing manager's indexes, said the slowdown "suggests that policymakers will want more time to assess the extent of the slowdown as we move into the fourth quarter,effectively postponing any rate hikes until next year."

"Although the growth rate (in the third quarter) remained reasonably solid, the concern is that there are signs that the fourth quarter could be even weaker. In particular, PMI survey data signaled a marked slowdown in business activity in September, suggesting the economy is entering the fourth quarter growing at a pace of just 0.3 percent."

Howard Archer, chief European and U.K. economist at IHS, said the data was also likely to cement concerns that the economy is too reliant on the services sector and on consumer spending. He was more optimistic about fourth quarter growth, however, predicting a 0.6 percent increase which would result in overall GDP growth of a respectable 2.4 percent in 2015.

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