UK economy grows at fastest rate in two years

The Office for National Statistics data for the third quarter is in line with predictions from the Bank of England and other forecasters and was the highest quarterly growth figure since the fourth quarter of 2016, when the economy grew 0.7 per cent.

Chancellor Philip Hammond said: “Today’s positive growth of 0.6 per cent is proof of the underlying strength in our economy. We are building an economy that works for everyone, with 3.3 million more people in work, lower unemployment in every part of the country, and wages rising at their fastest pace in almost a decade.”

However, buoyant growth in July was offset by a slowdown in August and September.

Analysts warned the economy had “little underlying momentum” and growth would decline in the final three months.

Howard Archer, chief economic advisor to the EY ITEM Club, said: “Despite the improved third quarter performance, monthly data for September indicate that the economy was flat at the end of the quarter. Monthly GDP growth was reported flat in September, as it had been in August. GDP was flat month-on-month in September as services output dipped 0.1 per cent month-on-month) while industrial production was flat (within this manufacturing output rose 0.2 per cent month-on-month). Better news saw construction output jump 1.7 per cent month-on-month.”

The ONS also issued a separate monthly figure for September, which, like the previous month, showed zero growth.

Services, which make up three-quarters of the economy, only grew by 0.3 per cent in the three months to September.

After a slow start to the year, construction activity grew by 2.1 per cent in the quarter. Manufacturing also picked up after a slow second quarter, thanks to strong car manufacturing numbers for the quarter.

Household spending grew by 0.5 per cent in the quarter, but business investment shrank by 1.2 per cent, suggesting uncertainty among companies over the effects of Brexit.

Business investment had been expected to rise by 0.2 per cent, according to forecasts. It has now contracted for three quarters in a row.

ONS head of national accounts Rob Kent-Smith said: “The economy saw a strong summer, although longer-term economic growth remained subdued. There are some signs of weakness in September, with slowing retail sales and a fallback in domestic car purchases.

“However, car manufacture for export grew across the quarter, boosting factory output. Meanwhile, imports of cars dropped substantially, helping to improve Britain’s trade balance.”