UK 3Q GDP shows economy remains in decent shape - ING

James Knightley, Senior Economist at ING, notes that the UK 3Q GDP was unrevised at 0.5%QoQ/2.3%YoY, but we did get the breakdown by expenditure for the first time.

Key Quotes

“Consumer spending rose 0.7% while investment spending rose 1.1% and government spending was up 0.4%QoQ. Net trade also made a positive contribution of 0.7 percentage points. There were some negative drags from some of the categories within gross fixed capital formation such as in acquisitions less disposable of valuables.”

“This is a firm growth story that again shows the economy has weathered the Brexit storm very well so far. The data flow so far suggests that the fourth quarter should also post a decent growth rate, but we still expect a substantial slowdown in 2017.”

“Our main concern relates to a squeeze on household spending power brought about by a sharp pick-up in inflation that isn’t matched by wage increases. We also expect a slowdown in hiring and investment by businesses as Brexit uncertainty kicks in and the political pressure rises once Article 50 is triggered. So while today’s report backs the Bank of England’s decision to move to neutral on the outlook for monetary policy we still think further policy easing is more likely than policy tightening.”