Fall in production slows growth

According to figures released this week by the Office for National Statistics, GDP in the UK is estimated to have grown by 0.4% in 2004 Q3 compared to 0.9% in the previous quarter.

This deceleration reflects a decline of 1.4% in the production sector following an increase of 1.2% in 2004 Q2.

The production sector decrease follows a fall in oil and gas extraction in the North Sea of 5%, and a fall of 1% in the manufacturing sector. Within manufacturing, the reductions were most pronounced in the paper, printing and publishing, food, drink and tobacco and chemical and man-made fibres industries.

The service sector rose by 0.8% in the latest quarter.

The distribution, hotels and catering sector rose by 0.8%, with strength in wholesale and retail trade. The transport and communications sector also rose by 0.8% due to increased output of telecommunications.

Business services and finance rose by 0.9%, driven by real estate and business activities, which includes architectural and engineering, recruitment and legal related services. Similarly, the government and other services sector rose by 0.8% with growth in health and social work.

Construction output rose by 0.8% in the latest quarter.

Household expenditure rose by 0.5% with increased spending on durable goods, which includes audio-visual equipment and furniture.

Government expenditure rose by 1.4% over the quarter and is now 4.7% above the level seen in 2003 Q3. Investment fell by 0.1% over the quarter as investment in transport equipment and other machinery and equipment declined.

The trade deficit remained unchanged at £12.8bn as exports of goods rose by 2.8% and imports of goods rose by 1.6%.

On the income side, compensation of employees, in nominal terms, rose by 0.8% and corporate incomes rose by 0.4% in 2004 Q3.