Economy 4 min read By Callum Montgomery
UK economy grows 0,7% in third quarter as services offset construction slump
Britain's gross domestic product rose 0.7% in the third quarter, a two-year high that matched forecasts, with business services lifting the headline figure while construction output fell sharply.
The British economy grew by 0.7% in the third quarter, its strongest rate in two years and in line with what economists had expected. Services, and business services in particular, supplied the main contribution to the headline figure, more than offsetting a sharp fall in construction output.
The figure compares output in the July to September period with the three months before it. Services overall lifted the total, with business services providing the principal offset to weakness elsewhere in the economy. Construction recorded a steep decline over the quarter, dragging on the overall number even as the wider service economy strengthened. The divergence between the two sectors is the central feature of the release, and it means the headline rate understates how uneven activity was beneath the surface.
The result matching forecasts indicates that the pace of growth was broadly anticipated by analysts rather than representing a surprise in either direction. For a quarter that delivered the fastest expansion in two years, that outcome is notable: it suggests the recovery was already priced into expectations, so the figure is more a confirmation of the trend than a shift in it. Businesses and policymakers will be weighing whether the services-led pattern reflects genuine broadening of demand or a narrower strength concentrated in a handful of industries.
The reliance on services to drive expansion carries implications for how the economy is balanced. Business services, which cover a wide range of professional, administrative and support activities, tend to be closely tied to the health of other firms, so their growth can signal that companies are investing in outsourced expertise and external support. Construction, by contrast, is often sensitive to borrowing costs, public spending and the confidence of developers, and a sharp fall in its output can reflect pressure across several of those channels at once. The contrast between the two sectors therefore raises questions about where momentum is coming from and where it is being lost.
Set against the two-year high, the third-quarter reading marks a clear improvement on the recent past, even if it does not amount to a dramatic acceleration. The figure gives a clearer sense of direction than any single month could, and it will be closely watched by households and firms deciding whether to spend, hire or invest. Each quarter's reading also feeds into wider judgements about the strength of the recovery and the room available to policymakers.
The available material does not include any revisions to earlier estimates, nor does it set out an official outlook for coming quarters. It is therefore not yet clear whether the rebound seen in the third quarter will be sustained, or whether the construction downturn will deepen or ease. Those questions will shape how the performance is read by policymakers and businesses in the months ahead, and they will determine whether the services strength can carry the economy through a period of weakness in construction.
Source: investing.com
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