Manufacturing growth strong, but construction in the doldrums
Chris Williamson, chief business economist at IHS Markit, has commented on the latest UK economic figures published by the Office for National Statistics.
He said: “The official data confirms the survey signals of a multi-speed economy. While manufacturing is enjoying strong growth, construction is in the doldrums, entering a new technical recession.
“Both industrial production and manufacturing output surged 0.7% in September 2017. The wider measure of industrial production and factory output were consequently both 1.1% higher in the third quarter, providing an important boost to the economy.
“It’s encouraging to see sectors such as machinery and equipment recording strong growth in Q3, as this is a good indicator of rising business investment. It remains unclear, however, as to how much of this was exported or intended for domestic customers.
“It was a different story altogether for the building sector, with construction output down 1.6% in September. That leaves construction output down by 0.9% in the third quarter following a 0.5% decline in the second quarter. The Q3 decline pushes the building sector into a technical recession for the first time since 2012.
“As seen in the recent PMI survey data, the commercial construction sector suffered the largest drop in output, highlighting how businesses appear to be pulling back on investing in new offices, factories and retail space.
“Trade statistics meanwhile showed the trade deficit narrowing in September, albeit with net trade still looking to have acted as a drag on the economy over the third quarter as a whole. Exports of goods to EU countries increased by £0.9bn (2.2%) in Q3, most likely reflecting the strengthening economic upturn in the euro area, but exports to non-EU countries fell by £1.7bn (3.8%).
“The overall picture is one of the economy continuing to show relatively resilient growth, albeit with an undercurrent of heightened uncertainty surrounding Brexit posing downside risks to economic activity in the months ahead, especially business investment.”