Europe Economy

UK economy avoids recession with third-quarter growth rebound

Key Points
  • U.K. third-quarter flash GDP estimate comes in at 0.3% higher than the previous quarter.
  • The data marks a rebound from the Q2 gross domestic product (GDP) which contracted by 0.2%.
  • Isolated September figures reveal another monthly contraction in manufacturing activity.
An employee works on an engine production line at a Ford factory on January 13, 2015
Carl Court | Getty Images News | Getty Images

The British economy has avoided slipping into a technical recession, after official data Monday showed the third-quarter gross domestic product (GDP) at 0.3%.

The data marks a rebound from the second-quarter gross domestic product (GDP) which contracted by 0.2%.

On a year-on-year basis, third-quarter growth slowed to 1%. This marked the slowest rate of expansion since the first three months of 2010.

On a month-to-month measure, September GDP alone marked a 0.1% contraction. Manufacturing data for September revealed a 0.4% contraction from August and a 1.8% fall from September 2019.

Both figures were a touch worse than a consensus of forecasts collated by Reuters.

Services output for September came in flat at 0.0% month-on-month and up 1.3% year-on-year. Industrial output and construction activity for the month also contracted from August figures.

There was very little initial reaction in the pound-versus-dollar trade. Just prior to the decision, sterling was trading at $1.2804 and this dipped to $1.2797 after the data drop.

Speaking to CNBC's Street Signs on Monday, Ross Walker, Head of UK & European Economics at Natwest Markets, said the figures were "slightly disappointing."

Walker said there had been some modest growth in retails sales and he had hoped this might prop growth up a little more.

"Underlying growth in the U.K. is clearly below trend," he said before adding that when accounting for Brexit-related swings in production, the data looked "a little bit tepid."

The Bank of England said last week that trend growth in the U.K. was currently about half of that in 2018.