Economy continues growth in Q3

THE economy grew 0.7% in the three months to September, official GDP figures have revealed.

The data for the third quarter was in line with City expectations, but showed a 0.2% fall from the 0.9% reported for the second quarter.

The Office for National Statistics said gross domestic product increased in all four main industrial groupings within the economy.

In order of their contribution, output increased by 0.7% in services, 0.5% in production, 0.8% in construction and 0.3% in agriculture.

While output slowed on a quarterly basis, GDP was 3% higher in Q3 2014 compared with the same quarter a year ago.

GDP was estimated to have been 3.4% higher on Q3 than the pre-economic downturn peak of Q1 2008. From the peak in Q1 2008 to the trough in Q2 2009, the economy shrank by 6%.

Business leaders in the West Midlands said they were cautiously optimistic about the latest figures.

Tim Pile, president of Birmingham Chamber of Commerce said the figures suggested economic growth was still tentative.  

“In productivity terms, the West Midlands is still lagging behind other UK regions, including the North West. This is despite the region producing an economic output larger than many European countries and strong manufacturing growth.

“Chamber businesses tell us that the issues of skills and transport are holding back economic productivity. The chamber is working on initiatives which will improve these challenges, a sure-fire way of boosting regional GDP.”

He said so far as transport was concerned, the Greater Birmingham Chambers of Commerce was working with Midlands Connect a project that would help to identify how better transport connectivity across the region could improve economic performance.

The largest contribution to Q3 2014 GDP growth came from services; these industries increased by 0.7%, contributing 0.58 percentage points. This followed an increase of 1.1% in Q2 2014.

In the latest quarter there was widespread growth, with increases in each of the four main services aggregates (distribution, hotels & restaurants; transport, storage & communication; business services & finance; and government & other services).

Growth in each of the main services aggregates was lower than in Q2 2014 with the exception of government & other services which grew by 0.3% in each quarter. In Q3 2014 output from services was 7.2% above its pre-economic downturn peak in Q1 2008.

There was also a positive contribution (0.07 percentage points) from production; these industries rose by 0.5%, with energy supply increasing by 6.5% following an increase of 1.5% in Q2 2014 and manufacturing increasing by 0.4% following an increase of 0.5% in Q2 2014.

Partially offsetting these rises were decreases of 1.2% in mining & quarrying following a decrease of 0.3% in Q2 2014, and 0.8% in water & waste management following a decrease of 2.5% in Q2 2014.

The increase in energy was caused by an increase in both electricity generation and the manufacture of gas. The increase in gas was mainly due to an increase in the demand for gas in the production of electricity.

Construction output increased by 0.8% in Q3 2014 when compared with Q2 2014, contributing 0.05 percentage points to GDP growth and follows a rise of 0.7% in Q2 2014.

Compared with the previous month, August 2014 saw a dip in construction output of 3.9% following a rise of 1.9% in July 2014. Early responses for last month indicate a strong rise continuing into September.