Photographer: Chris Ratcliffe/Bloomberg

Manufacturing Slump Hits U.K. Economic Growth

Manufacturing Slump Hits U.K. Economic Growth

Photographer: Chris Ratcliffe/Bloomberg

The U.K. economy continued to lose momentum in the three months through November as manufacturing slumped.

Growth slowed to 0.3 percent from 0.4 percent in the period through October, the Office for National Statistics said Friday. In November alone, gross domestic product grew 0.2 percent.

What Our Economists Say:

“A degree of cooling was always likely with several temporary factors that propped up the economy last summer dissipating. But Brexit uncertainty now seems to be having a material impact. The readings give the Bank of England little reason to rush its next move.”

--Dan Hanson, Bloomberg Economics. Read the full REACT

Key Insights

  • The dominant services sector gained 0.3 percent in November and construction grew 0.6 percent. But industrial production declined 0.4 percent, hit by a 0.3 percent fall in factory output.
  • Manufacturing has fallen for five consecutive months for the first time since 2008-09, with the car and pharmaceuticals industries both performing poorly.
  • If GDP grows at a similar pace in December, growth in the final three months of the 2018 would halve to 0.3 percent, one of the weakest calendar quarters since the 2016 Brexit referendum.
  • Fears about a no-deal Brexit are sapping consumer confidence, as illustrated by high street trading statements this week.
  • The figures come days before lawmakers are expected to reject the deal Prime Minister Theresa May reached with the European Union. Defeat would leave little time to avoid an abrupt departure from the bloc, the scenario feared by businesses.
  • Despite the fall in the pound since the Brexit referendum, the contribution to growth from trade has been disappointing and major export markets are now cooling. The trade deficit is at risk of widening further in the fourth quarter.

Read More: The Wreck of 2018 Shows in Brexit Barometer, and 2019 Looks Worse

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  • Eight of 13 manufacturing sectors saw production drop. Car output was flat and falling demand in China, the world’s largest car market, and newly announced job cuts at Ford and Jaguar Land Rover underline the risks facing the sector. Overall industrial production was also depressed by lower energy and oil and gas output.
  • Services were aided by a Black Friday boost to retailers in November, with the distribution, hotels and restaurants category posting the biggest rise since May.
  • A solid performance from services and construction in the latest three months -- accountancy and homebuilding both did well -- offset the biggest drop in industrial output since the first half of 2017.
  • The trade deficit in goods and services narrowed to 2.9 billion pounds ($3.7 billion) in November but anything over 2.8 billion pounds in December would cause the fourth-quarter shortfall to widen again, potentially acting as a drag on growth. The goods trade deficit worsened, but narrowed slightly when oil and erratic items are excluded as imports fell faster than exports.