U.K. economic growth accelerates sequentially in Q3 3018, preliminary estimate shows 0.6 pct growth

The U.K. economic growth rate accelerated in the third quarter of this year. The preliminary estimate of the U.K. GDP for the September quarter showed a quarterly growth of 0.6 percent, consistent with consensus expectations. The economic growth accelerated from the prior quarter’s 0.4 percent sequential pace and tis the most rapid rate since the fourth quarter of 2016. Therefore, the GDP growth in the year to third quarter reportedly accelerated to 1.5 percent from 1.2 percent previously.

As in recent quarters, the U.K. economic growth continues to be driven by the dominant services sector, albeit to a lesser extent than in the second quarter with both the construction and industrial sectors providing positive impulses to growth over the quarter, noted Lloyds Bank in a research report.

Still, the possibility of this momentum being sustained over subsequent quarters appears thin. The monthly estimate of the economic growth indicated that the economy stagnated for a second straight month in September with output in the service sector shrinking over the month. In the meantime, the recent weakness of business surveys – including those from the CBI and the PMIs – indicate towards a further easing in October, probably because of the ongoing impasse in the Brexit negotiations.

Both of these factors imply that the growth rate is expected to fall back in the fourth quarter, stated Lloyds Bank. Further evidence that the Brexit negotiations were impacting the economy was clear by the continued reluctance of companies to spend in the current environment. Business investment dropped for the third straight quarter in the third quarter, falling 1.2 percent quarter-on-quarter, compounding a dismal performance for this area of spending that has dropped 0.8 percent since the second quarter of 2016.

“As a result, we look for growth in the fourth quarter to ease back to around 0.3 percent q/q. Beyond that, however, the UK’s economic outlook is likely to rest heavily on the outcome of the Brexit negotiations”, added Lloyds Bank.

At 11:00 GMT the FxWirePro's Hourly Strength Index of British Pound was slightly bearish at -70.1476, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 47.7273. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex