Q3 GDP growth survives the referendum vote, but points to one reason for the outcome
In the wake of the Brexit vote, 2016 Q3 quarterly GDP growth of 0.5% (down from 0.7% in Q2) is regarded as a ‘result’. Growth compared with the same quarter a year ago is 2.3%, the highest since 2015 Q2 (when 2.4%).
In the industry detail, however, it’s business as usual.
Contributions to quarterly growth, percentage points
The service sector grew by 0.8% in Q3, up from 0.6% in Q2. As the chart shows the contributions to this figure were very strong ‘transport storage and communication’ figures (in blue, driven, according to the ONS, by ‘the motion picture, video and TV programme production, sound recording and music publishing activities, and computer programming industries’). For the rest: the usual hefty contributions from business and finance (olive green) and distribution and accommodation (red).
GDP growth was also supported for the second quarter in a row by strong energy figures (brown), this quarter dominated by energy extraction (oil and gas), and last quarter by energy distribution (electricity).
Manufacturing however reverted to negative territory – the uptick in Q2 (green) surprised commentators and was expected to unwind on Q3. Really this movement explains more than the whole of the reduction in aggregate GDP growth. In the meantime, construction (gold) dragged on GDP growth for the second quarter in a row.
So no Brexit effect. But the figures remind us of one of the factors behind the Brexit vote . Lacklustre growth driven only by the service sector is hardly unfamiliar. Those advantaged are disproportionately in London and the other metropolitan centres that voted to remain. Teresa May has recognised that prosperity is very unequally shared across the UK. The Autumn Statement offers the opportunity to begin to do something about it.