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Net Trade Contributed -1.0% to UK Gross Domestic Product

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Nov. 20 2020, Updated 3:56 p.m. ET

UK GDP rose 0.4%

According to the Office for National Statistics, the United Kingdom’s third-quarter GDP (gross domestic product) rose 0.4% in September compared to an estimate of 0.5%. On an annual basis, it fell 0.2% to 2.1% in 3Q15.

With the downward revision of GDP, the iShares MSCI United Kingdom ETF (EWU) has fallen by 6.5% as of December 22 over the past month. EWU has fallen 13.3% from a year ago.

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Construction activity fell 1.9% in 3Q15

Among the four main industrial groups, production rose by 0.2% in 3Q15, unrevised from the earlier estimate. Manufacturing, the largest component of production, fell by 0.4% in 3Q15. Construction activity fell by 1.9% in 3Q15, revised upward by 0.3% from the earlier estimate.

Service sector grew 0.6% in the 3Q15

In 3Q15, the service industry rose by 0.6% compared to the previous quarter’s estimate of 0.7%. With this rise, the service sector has marked its 11th consecutive quarter of positive growth.

With the service industry’s trending upward, banking services stocks such as Banco Santander (SAN), HSBC Holdings (HSBC), The Royal Bank of Scotland Group (RBS), and Lloyds Banking Group (LYG) rose 1.7%, 0.28%, 0.68%, and 0.23%, respectively, as of December 22, 2015.

Net trade contributed negatively toward GDP growth in 3Q15

Gross fixed capital formation contributed the most to quarterly growth at 0.8%, while household expenditure rose by 0.6%. Government spending rose by 0.6% in the third quarter. Business investment rose 2.2%, in-line with earlier estimates.

The only negative contribution to GDP came from net trade, which contributed -1.0% in 3Q15 compared to an estimated -1.5%.

In 3Q15, exports fell 0.3% compared to an estimated rise of 0.9%, whereas imports grew by 2.7% compared to an estimated rise of 5.5%.

With household spending increasing its pace, it may prove to be an important driver for UK economic growth. However, negative net trade may be a matter of concern going forward.

You may be interested to read Will Growth Favor Developed or Emerging Markets in 2016?

For the latest economic updates, please refer to Market Realist’s Global ETF Analysis page.

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