BRITAIN’S dramatic economic bounce-back between July and September is set to be trimmed tomorrow after a worse-than-expected performance in construction and manufacturing.
• Figures from last month flattered by one-off effects such as the Olympics, whilst output lost from Diamond Jubilee clawed back
• Economists expoect estimate to be revised to 0.9 per cent
• Howard Archer: “While the third-quarter GDP growth was encouraging and welcome news, the UK is by no means out of the economic woods and further relapses remain a very real possibility.”
Gross domestic product (GDP) growth in the third quarter is forecast to be revised down by the Office for National Statistics (ONS) to 0.9% from 1% in the first estimate.
The initial estimate, unveiled last month, was the fastest rate of quarterly growth in five years and marked the end of the longest double-dip recession since the 1950s.
But economists warned the figure was flattered by one-off effects such as the Olympic boost and clawed back output lost in the previous quarter from the Diamond Jubilee.
And recent sector data for September, which was not included in the ONS’s first estimate, revealed a surprisingly weak performance for construction and manufacturing.
Victoria Clarke, economist at Investec Securities, expects the estimate to be revised to 0.9 per cent.
But she added: “We judge that there is potential for a larger than typical revision and therefore plenty of scope for surprise in the figures next week.”
Experts warned the underlying picture will remain the same, regardless of any revision, with the economy still far below its peak in the first quarter of 2008.
The third quarter had one more working day than the previous quarter, due to the Queen’s Diamond Jubilee, which would have affected the estimate, the ONS said.
Meanwhile, the London 2012 Olympics and Paralympic Games also impacted economic activity in the third quarter.
Looking further ahead, growth is expected to fall back sharply between October and December amid a series of weak purchasing managers surveys for services, manufacturing and construction industries.
Bank of England governor Sir Mervyn King recently warned output could even shrink in the fourth quarter.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “While the third-quarter GDP growth was encouraging and welcome news, the UK is by no means out of the economic woods and further relapses remain a very real possibility.
“Indeed, it is looking increasingly questionable whether the economy will grow in the fourth quarter.”