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UK economy said to have expanded 0.7% between September and November: NIESR

H.S. Borji
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UK gross domestic product grew at a steady rate in three months through November as the economy continued to weather the storm of regional conflicts and a sharp downturn in the neighbouring Eurozone.

The UK economy accelerated 0.7 percent between September and November, following an identical increase in the previous three month period, the National Institute of Economic and Social Research reported today.

Today’s figure was identical to the third quarter growth estimate provided by the Office for National Statistics last month. Britain’s economy expanded 0.7 percent in the third quarter, unchanged from the previous estimate and down from 0.9 percent in the previous quarter. Year-on-year, GDP expanded 3 percent, confirming Britain’s leadership pace in the advanced industrialized world.

However, the figures weren’t all positive, as investment growth slowed to 6.3 percent annually. Consumer spending, which accounts for the bulk of the UK economy, increased 0.8 percent.

The NIESR estimate shows a continual moderation in UK output after the economy reached its pre-recession levels earlier this year. However, Britain faces a real risk of being sucked into the Eurozone’s spiral of weak growth and near-zero inflation. The Eurozone economy grew just 0.2 percent in the third quarter after stagnating in the previous quarter. Persistently weak inflation has prompted further speculation the European Central Bank could expand monetary policy in the new year in the form of government bond buying.

In a separate report the ONS said manufacturing production declined unexpectedly in October, led by a sharp fall in computer and electronics manufacturing. Manufacturing output declined 0.7 percent in October, the biggest drop since May. Economists forecast an increase of 0.2 percent.

Compared to October 2013, manufacturing production was up 1.7 percent, official figures showed.

Industrial production – a broad measure of factory output that includes energy production – declined 0.1 percent in October after rising 0.7 percent a month earlier. Year-on-year, industrial production was up 1.7 percent.

Manufacturing activity rebounded in November, reaching a four-month high, according to a report last week from Markit Group and the Chartered Institute of Procurement & Supply.

Markit’s gauge of UK manufacturing activity edged up slightly to 53.5 in November, as domestic demand drove output and employment growth.

“Though progress is not as robust as in the first half of the year, balance is being restored as output, orders and employment levels all rise at moderate if unexciting rates,” said CIPS CEO David Noble in a statement published last week.

He added, “This domestic uplift has been the counterbalance to disappointing export opportunities with the strength of sterling and lack of activity from emerging markets having an impact.”

The NIESR said the UK economy is expected to grow 3 percent this year and 2.5 percent in 2015, slightly lower than the International Monetary Fund’s estimates of 3.2 percent and 2.7 percent, respectively. Although the rate of growth has slowed from earlier this year, spare capacity will continue to be absorbed. The NIESR now believes the Bank of England will raise interest rates in the middle of next year.

As expected, the BOE made no changes to monetary policy at last week’s meetings.

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