Rachel Reeves ‘not satisfied’ with summer time slowdown as UK slips down G7 progress leaderboard – enterprise reside

The Decision Basis have calculated that the UK has fallen behind the US for progress to this point this 12 months.

They clarify that the UK had the quickest rising economic system within the G7 within the first half of this 12 months, after rising by 1.2% from January to June.

However Britain’s GDP rebound has now “run out of steam”, with immediately’s knowledge displaying GDP slowing to 0.1% within the third quarter of 2024 (one of many weakest charges throughout the G7, as defined right here).

Decision say this slowdown places UK progress over the primary three quarters of the 12 months at 1.3%, behind the US (1.9%) however forward of France and Italy (0.8% and 0.4%), with Canada set to remain simply behind the UK based mostly on present forecasts.

Simon Pittaway, senior economist on the Decision Basis, says:

“After bouncing again from recession earlier this 12 months, Britain’s restoration is already operating out of steam. The UK has fallen beneath the US on the high of the G7 GDP progress leaderboard, with progress slowing, wage rises shrinking and employment beginning to fall.

“The UK has been a GDP rollercoaster over the previous 12 months, however its medium-term efficiency has been staid and stagnant. Over the previous 5 years, the economic system has shrunk by 0.7 per cent when you account for inhabitants progress.

“This all serves to highlight that the Government’s mission to renew strong economic growth is both extremely hard, and absolutely necessary.”

Economist consultants are in broad settlement that finances uncertainty damage progress over the summer time.

Hailey Low, affiliate economist on the Nationwide Institute of Financial and Social Analysis (NIESR), says:

“As we speak’s Q3 GDP figures, although much less sturdy than within the first half of the 12 months, mirror the affect of pre-budget uncertainty.

Extra notably, it’s disappointing that the Chancellor didn’t absolutely leverage her landmark finances final month to introduce measures addressing the UK’s low productiveness progress, tackling progress inertia, and stimulating long-term financial progress.”

Lindsay James, funding strategist at Quilter Traders, blamed ‘gloomy messaging’ from the federal government within the run-up to the finances:

“With the finances now firmly within the rearview mirror and the Chancellor reinvigorating her message of progress with the Mansion Home speech, immediately’s quarterly GDP figures spotlight the malaise the UK nonetheless finds itself in. Regardless of good momentum early this 12 months, progress has stumbled as soon as once more, rising simply 0.1% over the past three months, with September truly seeing a contraction.

A lot of this can have been on account of the gloomy messaging that was persistent within the run as much as the finances, inflicting customers and companies to pause spending and await what ache was to come back.

Right here’s Jeremy Batstone-Carr, European strategist at Raymond James Funding Companies:

“This morning’s knowledge confirms that the tempo of UK financial growth slowed within the run-up to Rachel Reeves’ inaugural Funds. As customers and companies waited to listen to the Authorities’s fiscal coverage plans, financial exercise decelerated, though to not a halt. Regardless of weak point in authorities spending and commerce, buoyancy in client spending was enough to develop the economic system by 0.2% within the third quarter of this 12 months.

Chancellor Rachel Reeves says she is “not satisfied” with immediately’s GDP figures displaying the economic system slowed over the summer time.

Reeves says:

“Enhancing financial progress is on the coronary heart of every part I’m searching for to realize, which is why I’m not happy with these numbers.

“At my Funds, I took the troublesome decisions to repair the foundations and stabilise our public funds.

“Now we are going to deliver growth through investment and reform to create more jobs and more money in people’s pockets, get the NHS back on its feet, rebuild Britain and secure our borders in a decade of national renewal.”

As we speak’s GDP report reveals that the UK is sitting in the direction of the underside of the G7 for progress over the summer time.

Right here’s how the lacklustre progress of simply 0.1% final quarter compares with different main economies:

Labour have pledged to ship the “highest sustained growth in the G7”; immediately’s knowledge reveals loads of progress is required…..

Luke Bartholomew, deputy chief economist at funding group abrdn, additionally factors the finger on the finances:

“The economy was always going to slow from the famously “gangbusters” tempo of the primary half of this 12 months, however the extent of the slowdown is a little more pronounced than anticipated.

With exercise progress in September being reported as significantly weak, it’s believable that a few of slowing is the results of elevated uncertainty at the moment, as corporations and households speculated about doable tax modifications forward of the Funds. That stated, it is usually doable that this simply represents regular month-to-month volatility quite than something extra basic.

In any regard, the contents of the Funds ended up considerably boosting the expansion and inflation image for 2025, and so in that context these knowledge will most likely do little to alter the considering on the Financial institution of England. We proceed to count on additional gradual easing, with the following charge reduce coming early subsequent 12 months.”

The CBI are blaming the uncertainty round final month’s finances for the slowdown in progress over the summer time.

Ben Jones, CBI Lead Economist says:

“The UK economic system stalled over the third quarter. Uncertainty forward of the Funds most likely performed an enormous half, with corporations extensively reporting a slow-down in choice making. Hopefully this can show to be a blip. We nonetheless count on the economic system to return to a path of modest progress within the 12 months forward. However draw back dangers to the outlook have elevated.

“The Funds has set off warning lights for enterprise. The hike in Nationwide Insurance coverage Contributions alongside different will increase to employers’ price base will add to the burden on enterprise. And it’s anticipated to set off a extra cautious method to pay, hiring and funding as corporations work by means of what it means for their very own budgets.

Right here’s a chart displaying how the UK economic system fared over the past quarter – shrinking within the second half of final 12 months, earlier than returning to progress in 2024:

ONS Director of Financial Statistics Liz McKeown says:

“The economy grew a little in the latest quarter overall as the recent slowdown in growth continued. Retail and new construction work both performed well, partially offset by falls in telecommunications and wholesale. Generally, growth was subdued across most industries in the latest quarter.

“In September the economy shrank a little. Services showed no growth with a notable increase in car sales offset by a slow month for IT companies. Production fell overall, driven by manufacturing, though there was an increase in oil and gas extraction.”

The UK economic system ended the summer time on a weak notice, with GDP contracting in September.

As we speak’s GDP report reveals that month-to-month actual GDP is estimated to have fallen by 0.1% in September.

This was largely as a result of declines in manufacturing output and knowledge and communication companies, the ONS says.

Whereas the companies sector stagnated in September, manufacturing output fell by 0.5% within the month, however building output grew by 0.1%.

Disappointingly, the economic system truly contracted within the final quarter when you modify for inhabitants modifications.

Actual GDP per head is estimated to have fallen by 0.1% within the third quarter of 2024, and is flat, in contrast with the identical quarter a 12 months in the past, the ONS says.

That’s one indicator for a rustic’s dwelling customary.

Newsflash: the UK economic system has suffered a summer time slowdown.

GDP rose by simply 0.1% within the July-September quarter, knowledge simply launched by the Workplace for Nationwide Statistics reveals.

That’s down from the 0.5% progress within the second quarter of the 12 months, and weaker than the 0.2% anticipated.

The scorecard for the Labour govenment’s first quarter in workplace reveals that the companies sector grew by 0.1%, whereas building grew 0.8%.. however manufacturing fell by 0.2% within the quarter.

We’ve additionally realized in a single day that Japan’s economic system slowed over the summer time.

Japan’s GDP rose by simply over 0.2% in July-September, in line with new authorities knowledge that reveals the economic system grew at an annualised charge of 0.9% in Q3.

That’s a slowdown on Q2, when Japan’s economic system grew by round 0.55%.

Though family spending held up within the final quarter, there was a dip in capital spending as corporations held again from funding selections. Web commerce additionally had a destructive affect on progress.

Brexit has additionally been holding again the UK economic system, the Financial institution of England governor warned final night time as he urged ministers to “rebuild relations” with the EU.

Talking on the Mansion Home dinner within the Metropolis of London on Thursday night, Andrew Bailey stated he took no place on Brexit “per se”, however added: “I do have to point out consequences.”

He stated Brexit had “weighed” on the economic system, declaring particularly the affect of Brexit on the UK’s commerce in items, including:

“It underlines why we must be alert to and welcome opportunities to rebuild relations while respecting the decision of the British people.”

Keir Starmer’s authorities has pledged to deepen cooperation with the EU, although Brussels has made clear it’s unwilling to carry wide-ranging negotiations on the commerce and cooperation settlement (TCA).

Labour is against re-entering the EU’s single market or customs union. As a substitute, the federal government hopes to win extra modest modifications akin to mutual recognition {of professional} {qualifications} and a veterinary settlement that might alleviate the necessity for checks on meals exports.

Good morning, and welcome to our rolling protection of enterprise, the monetary markes and the world economic system.

Keir Starmer and Rachel Reeves are about to get their first quarterly progress report since taking workplace, and it’s not anticipated to be glowing.

At 7am GMT the primary estimate of UK GDP for the third quarter of 2024 can be launched, in addition to for September alone.

Economists predict the economic system grew by 0.2% in July-September, a comparatively weak progress charge. That will be a slowdown on the 0.5% progress recorded in April-June, and the 0.7% in January-March.

If that occurs, Labour’s gloomy discuss since successful the final election in early July is prone to take another blame. Warnings of a ‘painful’ finances hit confidence amongst each customers and companies, which can have a knock-on affect on spending, and funding selections.

Alternatively, Reeves may nicely argue {that a} slow-moving economic system justifies her push for progress – though the additional spending specified by final month’s finances is barely anticipated to provide a short-term carry to financial output…

Earlier knowledge have proven that the UK economic system stagnated in June and July – because the restoration from final 12 months’s shallow recession light – earlier than returning to progress in August.

Sanjay Raja, chief UK economist at Deutsche Financial institution, predicts that the UK economic system moved from a “spring sizzle” to a “summer simmer”.

After a strong H1-24, UK progress over summer time will possible sluggish. We count on Q3-24 GDP progress to sluggish to a extra paltry 0.2% quarter-on-quarter.

We see September GDP, which will even be launched as a part of the GDP knowledge dump, rising by 0.2% month-on-month. Dangers are skewed larger on the quarterly print, however decrease on the month-to-month September print, we expect.

The agenda

• 7am GMT: First estimate of UK GDP for Q3 2024

• 7am GMT: First estimate of UK GDP for September 2024

• 7am GMT: UK commerce steadiness for Q3 2024

• 8.30am GMT: Hong Kong’s GDP report for Q3 2024

• 9.30am GMT: UK productiveness knowledge for Q3 2024

• 1.30pm GMT: US retail gross sales for October