UK Economy Set To Record Stronger Growth In Q3: Capital Economics
The ongoing strength of the British private sector, as indicated by the latest purchasing managers' surveys, points to a sharp pick-up in GDP growth in the third quarter, Capital Economics Chief UK Economist Vicky Redwood said Thursday.
Capital Economics forecasts that economic growth in the third quarter would comfortably match or exceeded the 0.7 percent growth recorded in the second quarter.
However, muted employment growth and subdued price pressures, as evidenced by the PMI surveys, suggest that the strong economic growth is unlikely to translate into a rapid fall in the unemployment rate, a pick-up in price pressures, or a near-term rise in official interest rates, the firm said.
According to Redwood, while retail sales and industrial production look set to beat the growth seen in the second quarter, the sharp widening of the trade deficit in July suggests that net trade will struggle to contribute to growth as it did in the June quarter.
Further, data from the three PMI surveys, comprising manufacturing, construction and services, suggest that the fourth quarter is starting on a strong note too, the economist said.
Survey data compiled by Markit Economics today showed that the purchasing managers' index for the UK service sector stayed well above the neutral mark in September, signaling stable growth momentum in the sector. At 60.3, the index was little changed from August's reading of 60.5.
The movement of the index over the third quarter as a whole shows that services output increased at a faster rate of 1.5 percent than 0.6 percent in the second quarter.
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