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UK economic growth is slowing down

Written by Adrie van der Luijt

Thursday, 20 December 2007

Gross domestic product (GDP) rose by 0.7 per cent in the third quarter of 2007, down from 0.8 per cent in the second quarter.

The level of GDP is now 3.3 per cent higher than the third quarter of 2006.

The output of the production industries was flat in the latest quarter compared with a rise of 0.7 per cent in the previous quarter. The decrease in growth was due to weakness in mining and quarrying, down 1.1 per cent and flat growth in manufacturing.

Growth in the service industries was 0.8 per cent in the third quarter, the same rate recorded in the previous quarter.

Growth driven by business and financial services sector

Growth continues to be driven by the business and financial services sector, although growth here slowed a little to 1.3 per cent following growth of 1.4 per cent in the previous quarter. Construction output rose by 0.8 per cent in the latest quarter and is now 3.5 per cent higher than the third quarter of 2006.

Household expenditure rose 1.1 per cent, with strong growth in spending on household durable goods. Household expenditure is now 3.6 per cent higher than the third quarter of 2006.

Government final consumption expenditure rose by 0.3 per cent and is now 1.9 per cent higher than the third quarter of 2006. Gross fixed capital formation rose 2.4 per cent and is now 6.0 per cent higher than the third quarter of 2006.

The trade deficit in real terms increased to £12.0 billion in the third quarter, and is deducting 0.8 percentage points from the expenditure measure of GDP when compared with the second quarter of 2007. Growth of 2.0 per cent in exports of goods and services was more than offset by growth of 4.7 per cent in imports.

The GDP expenditure deflator rose by 2.9 per cent compared with the third quarter of 2006, down from 3.9 per cent in the previous quarter.

Compensation of employees, measured at current prices, rose by 1.2 per cent and is now 4.7 per cent above the level seen in the third quarter of 2006. Total gross operating surplus of corporations rose by 1.8 per cent and is now 7.7 per cent higher than the third quarter of 2006.

Current account deficit widens

There was a current account deficit of £20.0 billion in the third quarter, equivalent to -5.7 per cent of Gross Domestic Product (GDP), compared with £13.7 billion, equivalent to -4.0 per cent of GDP, in the previous quarter. The higher deficit was due to an increase in the deficits on trade in goods and on investment income.

The deficit on trade in goods increased by £3.1billion to £22.6 billion. The higher goods deficit resulted from a rise in net imports of oil and semi and finished manufactured goods.

Lower net earnings on foreign direct investment and higher net payments on other investment abroad led to a £3.6 billion increase in the income deficit. These effects were slightly offset by a small increase in the surplus trade in services while current transfers were virtually unchanged from the previous quarter.

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