UK GDP grows more than expected in third quarter, ONS reveals

The UK economy grew more than expected in the third quarter, according to the first official data covering a full quarter since the Brexit vote.

Gross domestic product rose 0.5% quarter-on-quarter in the three months to September, slowing from 0.7% in the quarter to June, the Office for National Statistics revealed on Thursday.

However, the GDP report flew in the face of expectations for a bigger slowdown in growth following the UK’s vote to leave the European Union on 23 June. Economists had pencilled in just 0.3% quarter-on-quarter growth.

Compared to a year ago, third quarter GDP increased 2.3% following a 2.1% year-on-year increase in the second quarter. Analysts had expected no change to the annualised figure.

The ONS said a 0.8% expansion in the service industries was offset by a decrease in output in industrial groups including a 1.4% fall in construction, a 0.7% dip in agriculture and and a 1.0% slide in manufacturing.

Paul Sirani, chief market analyst at Xtrade, said: “Growth in the UK economy has been relatively buoyant in the circumstances and, with the festive spending splurge on the way, there are reasons to be stoical if not cheerful.

“But the quarterly downturn in GDP might well suggest that we’re slipping back. We may need to batten down the hatches for 2017 if rising inflation and a weakening pound turn out to be the principle presents in Santa’s sack.”

Other analysts said GDP is yet to show the impact of the EU referendum as Prime Minister Theresa May is still yet to invoke Article 50, which begins the formal Brexit process. May said she will trigger Article 50 by March.

"The stronger than expected GDP readings are nothing to do with the Brexit vote, they are higher as they are following the trend of growth in the UK that has been in place for the previous three quarters," said James Hughes, chief market analyst at GKFX.

"It is more or less impossible to gauge what the effect will be on the UK economy when Article 50 is invoked, and we finally do leave the European Union."