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Rise in Household Spending Provided Respite for UK Economic Growth

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Dec. 4 2020, Updated 10:53 a.m. ET

United Kingdom’s GDP grew by 0.5% in the third quarter

In line with the preliminary estimate, the second GDP (gross domestic product) estimate in the United Kingdom rose at an annual rate of 2.3% in September—compared to 2.4% in the previous period. On a quarterly basis, it rose by 0.5% in September—compared to 0.7% in the previous quarter. Over the past month, the iShares MSCI United Kingdom ETF (EWU) fell by 2.5% as of November 27. EWU fell 9.8% from a year ago.

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Construction activity fell by 2.2% in fiscal 3Q15

On a quarterly basis, production rose by 0.2% in fiscal 3Q15. It’s 0.1% lower than the preliminary estimate. Manufacturing is the largest component of production. It fell by 0.4%. The agriculture output rose by 0.4% and construction growth fell by 2.2% in fiscal 3Q15.

Service sector grew steadily since 2008

In fiscal 3Q15, the service industry rose by 0.7%. This marked the 11th consecutive quarter with positive growth. Although the service industry is trending upwards, banking services stocks like Banco Santander (SAN), HSBC Holdings (HSBC), The Royal Bank of Scotland Group (RBS), and Lloyds Banking Group (LYG) fell by 6.1%, 0.48%, 8.0%, and 2.8%, respectively, over the past month as of November 27. Since 2008, the service sector grew steadily while the production output has been broadly flat.

Net trades contributed negatively towards the GDP growth

The gross capital formation contributed the most to the quarterly growth. It rose by 1.2%. The household expenditure rose by 0.5%. Also, government spending rose by 0.3% in the third quarter. The only negative contribution to the GDP (gross domestic product) came from net trade. It contributed a negative 1.5% in fiscal 3Q15—compared to a rise of 1.2% in fiscal 2Q15. In fiscal 3Q15, exports rose by 0.9% in the second estimate compared to a 1.9% rise in the second quarter. Imports grew by 5.5% in fiscal 3Q15 following a 2.7% fall in fiscal 2Q15.

 

With household spending gathering pace, it could be an important growth driver for the United Kingdom’s economic growth. However, the fall in export trades could be a concern in the future.

In the next part, we’ll see how domestic and export demand is shaping Japan’s industrial production.

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