The United Kingdom has recently revised its Q3 GDP down to 0.4% growth. Initial projections were 0.5% growth, and the country has slowed over the last two quarters. The new data signals that the country may be losing momentum.
The Office for National Statistics in London also revised down the Q2 growth to 0.7%, down 0.2% from initial estimates. The United Kingdom has started to lose momentum in 2015, and the economy is expected to grow by 2.2% in 2016.
This is the weakest performance that the United Kingdom has had since 2012, and the new data will likely hinder the Bank of England from raising interest rates in the first half of 2016. Annual growth in the third quarter reached 2.1%, down from 2.3%. Provisions in the finance industry were the cause for the loss in Q2 and Q3 respectively.
Domestic demand is leading the country’s growth, and spending has been revised up to 0.9% in Q3. Real disposable income has grown 4% this year, which is the fastest-growing rate the country has experienced since 2010. Salaries rose by 1.2%, and consumer’s willingness to hold onto less of their money has caused savings ratios to drop to the second lowest level on record, just 4.4%.
Labor shortages are requiring businesses to increase productivity by as much as 1.3% in Q3 and will be a major factor in the UK’s growth in 2016.