UK's GDP falls marginally in Q3
The preliminary estimate of Britain's GDP by the Office for National Statistics (ONS) has indicated that growth of the UK economy slowed from 0.7 per cent in Q2 2015 to 0.5 per cent in Q3 2015, and from 2.4 per cent to 2.3 per cent compared to the same quarter a year earlier.
While the output of the services industries is estimated to be 11.1 per cent above its pre-downturn peak, the manufacturing industry remains 6.3 per cent below this yardstick. Over the recovery, there has also been a shift in the composition of services output away from financial services toward other services.
According to the data, the unemployment rate fell from 7.7 per cent in the three months to August 2013, to 6.0 per cent in the same period the following year and to 5.4 per cent in the most recent data. This edition of the Review shows that the fall has been broad based across workers that have been unemployed for a range of durations - including those who have been unemployed for longer than two years - which contrasts with earlier downturns.
Growing evidence of tightening in the labour market has been accompanied by a sharp rise in the rate of earnings growth, driven in part by a sharp recovery in private sector earnings growth. Combined with relatively stable prices, the trend of falling real earnings following the economic downturn has partly reversed, albeit to differing extents across industries. Stronger growth in earnings and employment have also had a correspondingly positive impact on measures of household income, with recent experimental ONS estimates suggesting median household income rose 3 per cent in the year to March 2015.
Domestic price pressure in the UK economy remains weak, with factors such as the recent fall in the oil price, the strength of Sterling and strong competition among retailers acting to reduce the Consumer Prices Index (CPI) inflation rate. Energy, food and fuels account for a large fraction of the recent movement in the CPI, while housing, transport and education have made a relatively stable contribution in recent quarters. However, there is some evidence of weakening price pressure among the remaining class level items in the CPI. A diverse range of goods within this group – including second hand cars and information processing equipment – have put downward pressure on the CPI in recent months.
The recent weakness of the current account has largely been driven by a fall in the UK's balance on primary income – mainly as a consequence of a deteriorating FDI income balance. ONS recently published a detailed examination of some of the factors affecting FDI income alongside the annual Pink Book publication on 30 October. This edition of the Review focuses on the distribution of the rates of return on the UK's FDI analysis, which have been identified as a key factor in the recent development of the current account balance, the review said. (SH)
Fibre2Fashion News Desk – India