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Britain dodged a recession ahead of the now-postponed Oct. 31 Brexit deadline, providing an election boost for Prime Minister Boris Johnson.
The economy grew 0.3% between July and September, avoiding a second straight quarter of contraction, the Office for National Statistics said on Monday. Still, the figures were weaker than expected and showed the economy had little momentum as it entered the fourth quarter.
Johnson is seeking a Conservative majority in a general election on Dec. 12 to push his Brexit deal through Parliament.
If he wins, Britain could be out of the European Union by the new deadline of Jan. 31. If he loses, Brexit could be delayed further, extending the uncertainty hanging over the economy, or the U.K. could see its most socialist government since the 1970s.
The rebound from the second quarter masked a fragile underlying picture, with GDP contracting in both August and September against a backdrop of Brexit uncertainty and slowing global growth.
It means the economy was losing strength as it entered a climatic year-end, explaining why two Bank of England official broke ranks to push for an interest-rate cut last week. The BOE expected an expansion of 0.4% in the quarter, in line with private-sector analysts.
Fragile Outlook
Economists expect growth to slow to 0.2% in the fourth quarter, with 2019 as a whole expanding just 1.2% -- the slowest pace since the financial crisis a decade ago. The outlook for 2020 depends on both the election and progress in Brexit.
A breakdown of the latest data revealed a familiar pattern, with solid consumer and government spending offsetting weak business investment. Services and construction expanded, while manufacturing flat-lined, with only a rebound in car production preventing the sector from declining.
There was little evidence of Brexit hoarding, with inventories actually falling over the quarter. That knocked 0.4 percentage point off growth. By contrast, they added 1.4 points in the first quarter ahead of the initial March 29 deadline to leave the EU. An unwinding of those stockpiles contributed to downturn in the following three months.
The quarterly GDP increase was due entirely to a strong July, with output falling 0.2% in August and 0.1% in September. Overall GDP rose just 1% in the third quarter from a year earlier, the least since 2010.
Exports jumped in the quarter, leading to a sharp narrowing of the trade deficit. Net trade added 1.2 points to growth. However, the data have been volatile recently because of effect of stockpiling and flows of non-monetary gold.
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