Commenting on today’s GDP figures for Quarter 3 (July to Sept) 2018, 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 fall-back 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.”
In today’s headline figures, the three months of Quarter 3 (July, August and September) are being compared with the months of Quarter 2 (April, May and June). While the two most recent monthly growths were flat, a strong growth into July coupled with the lower level in the base period give a comparatively strong quarterly growth rate. This can be seen in Figure 2, where the levels for Quarter 3 are significantly higher than the levels for Quarter 2.Nôl i'r tabl cynnwys
The services sector had growth of 0.4% in Quarter 3 (July to Sept) 2018 and was the largest contributor to headline gross domestic product (GDP) growth. The production industries grew by 0.8% in Quarter 3, while construction grew by 2.1%; this strong growth resulted in construction having a larger-than-usual contribution to quarterly GDP growth at 0.13 percentage points (Figure 3).Nôl i'r tabl cynnwys
Rolling three-month growth was 0.6% in September 2018 (Figure 4), in line with the stronger growths seen in both July and August. The effects of the warmer-than-usual weather seen in the summer months continued to impact on economic growth in the most recent quarter.
Rolling three-month growth is based on output gross value added (GVA) and therefore there will be discrepancies in the time series with our quarterly estimates of gross domestic product (GDP), which include information on the expenditure and income approaches to measuring GDP.Nôl i'r tabl cynnwys
|Jul-18||Aug-18||Sep-18||Quarter 3 2018|
|Index of Services||0.3%||0.0%||-0.1%||0.4%|
|Index of Production||0.4%||0.0%||0.0%||0.8%|
Download this table Table 1: Breakdown of GDP growth rates by month.xls .csv
Monthly growth was flat in August and September 2018, following a downwardly-revised 0.3% month-on-month growth in July (Table 1).
The monthly growth rate for gross domestic product (GDP) is volatile and therefore it should be used with caution and alongside other measures such as the three-month growth rate when looking for an indicator of the longer-term trend of the economy. However, it is useful in highlighting one-off changes that can be masked by three-month growth rates.Nôl i'r tabl cynnwys
The services sector grew by 0.4% in Quarter 3 (July to Sept) 2018 (Figure 5), driven by information and communication, as well as wholesale and retail trade. These contributed 0.13 percentage points and 0.08 percentage points to headline gross domestic product (GDP) growth, respectively.
The services sector contracted by 0.1% in September 2018. This was the first negative monthly growth since February 2018.
Trade of motor vehicles decreased by 6.2% in September, contributing negative 0.11 percentage points to GDP growth. Legislative changes on 1 September resulted in higher-than-usual sales in August, and lower-than-usual sales in September, causing the negative monthly growth rate. This was also reported by the Society of Motor Manufacturers and Traders (SMMT). However, when looking at the longer-term picture (Figure 6), it becomes clear that there has been a slowing in growth in motor trade since 2016. This has also been reported by SMMT, who have cited the fall in demand for diesel-fuelled cars (see Index of Services bulletin).
Motion pictures grew by 9.3% in September, making information and communication the biggest contributor to monthly growth. The rise in motion pictures was due to broad-based growth within the sector. More information about the longer-term strong performance of the UK film industry over the past few years can be found in a previous article.
Nôl i'r tabl cynnwys
Production grew by 0.8% in Quarter 3 (July to Sept) 2018, but was flat in the month of September. The quarterly growth rate was the highest since Quarter 3 2017, when it was 0.9%.
Manufacturing returned to growth in Quarter 3, increasing by 0.6% (Figure 7) and contributing 0.06 percentage points to gross domestic product (GDP) growth. This was a bounce back from negative growth seen in Quarter 2 (Apr to June). The growth was driven by manufacture of transport equipment (car and engine production), which contributed 0.03 percentage points, as more goods were exported (see Index of Production bulletin).Nôl i'r tabl cynnwys
Construction grew by 2.1% in Quarter 3 (July to Sept) 2018, boosted by month-on-month growth of 1.7% in September. New work in infrastructure and housebuilding drove the monthly growth in September. When examining the index (Figure 8) it is apparent that, despite a drop in the first half of 2018, construction output is increasing at a pace well above that of the other sectors and gross domestic product (GDP) itself.Nôl i'r tabl cynnwys
Household expenditure growth increased to 0.5%, contributing 0.34 percentage points to gross domestic product (GDP) growth in the latest quarter.
Gross capital formation, which includes gross fixed capital formation (GFCF), changes in inventories and the acquisitions less disposals of valuables was the only expenditure component to contribute negatively to GDP growth (Figure 9). GFCF contributed 0.14 percentage points to GDP growth, with increases in government and private dwelling investment being partially offset by a fall of 1.2% in early estimates of business investment.
Net trade also contributed positively to GDP growth, driven by a 2.7% rise in exports of goods and services.Nôl i'r tabl cynnwys
Nominal gross domestic product (GDP), or GDP in current prices, grew by 1.1% in Quarter 3 (July to Sept) 2018, with increases seen in all the components of the income approach to measuring GDP.
Compensation of Employees (CoE) increased by 1.3% in the latest quarter, in line with increases seen in nominal wage growth in the latest labour market data. CoE provided the largest contribution to GDP growth, contributing 0.63 percentage points in the latest quarter (Figure 10).Nôl i'r tabl cynnwys
The Gross domestic product (GDP) Quality and Methodology Information report contains important information on:
the strengths and limitations of the data and how it compares with related data
uses and users of the data
how the output was created
the quality of the output including the accuracy of the data
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