Britain’s economy flatlined in October as growth in services was offset by a decline in construction, official figures showed.
GDP grew by 0.0% in October and was flat for the three months to the end of October, the Office for National Statistics said. The result for the month of October pushed the annual growth rate down to 0.7%, the weakest in almost eight years.
Services, which make up about three quarters of the UK economy, expanded by 0.2% in the month of October but construction and manufacturing shrank over the three-month period. October’s 2.3% drop in construction output, caused by what the ONS said was a “notable drop in housebuilding and infrastructure”.
The figures paint a gloomy picture two days before a general election overshadowed by Brexit in which both main parties are promising to increase public spending for a country weary of austerity. Lack of growth could add to pressure on the Bank of England to reduce interest rates as the global economy slows and political uncertainty lingers in the UK.
Paul Dale, chief UK economist at Capital Economics, said: “The stagnation in GDP in October is unlikely to influence many people’s vote in Thursday’s election, but it could prompt some more MPC members to consider voting for lower interest rates in the coming months.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the fall in October construction output reflected large businesses shifting the timing of some infrastructure work and wet weather that reduced activity at some building sites.
“With GDP in October merely in line with Q3’s average, it now looks set to undershoot the MPC’s forecast for a 0.2% quarter-on-quarter increase in Q4,” Tombs said. “Nonetheless, if the general election yields a majority in the Commons either to ratify the PM’s existing deal or to change course to a much softer form of Brexit or none at all, then the subsequent recovery in business and consumer confidence likely would enable the economy to regain some momentum early next year.”
But Jack Leslie, economic analyst at the Resolution Foundation thinktank, said the government elected on Thursday would need to do more to support growth as the world economy slows.
“Crucially the UK’s domestic challenges come against a weak global economic outlook for next year,” he said. “While the main parties have avoided any discussion of this challenging economic environment during the election campaign, navigating it will be a central task for the next government nonetheless.”
By Sean Farrell
Source: ShareCast