Q3 GDP data – PwC comments

In response to the preliminary Q3 GDP data released today, John Hawksworth, chief economist at PwC, commented:

“Today’s preliminary GDP data confirmed that the UK economy held up remarkably well in the third quarter, brushing off earlier fears that the Brexit vote could cause an immediate dive into recession.

“Overall GDP growth of 0.5% in the third quarter was even better than expected, broadly maintaining the 2% annual pace of growth in the year before the referendum.

This growth was entirely reliant on the resilience of the services sector, however, with both manufacturing and construction seeing a post-referendum fall in activity.

Given that these are generally the most cyclical sectors, this could still be a harbinger of a future moderation of growth if their weakness spreads to the services sectors, although there is little hard evidence of this yet.

“The two strongest sub-sectors in the third quarter were transport and communications and distribution, hotels and restaurants.

The latter in particular reflects continued strong consumer spending through the summer and early autumn, but this could be eroded over the next year as the weaker pound pushes up import prices and squeezes real household spending power.

“Overall, it looks like the economic impact of Brexit is more likely to be a gradual drag on growth over the next few years as negotiations with the EU proceed, rather than a short, sharp shock.”

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