UK Economy Recovers On Services Output

(RTTNews) - The UK economy recovered in August solely driven by the rebound in the service sector, while industrial output and construction contracted again, the Office for National Statistics said Thursday.

Gross domestic product grew 0.2 percent in August from July, when the economy contracted by revised 0.6 percent. The monthly growth matched expectations.

In the three months to August, GDP posted a 0.3 percent expansion compared with the quarter to May.

Data showed that the service sector was the only positive contributing sector to the growth in August. Services output was up 0.4 percent, after shrinking 0.6 percent in the previous month.

Meanwhile, industrial production fell 0.7 percent, following a 1.1 percent drop in July. The largest driving force was manufacturing, which declined 0.8 percent, following July's 1.2 percent decline.

Mining and quarrying was the only production sub-sector to register increased output in August, growing by 2.9 percent.

Due to a 1.5 percent drop in new work, the construction sector shrank 0.5 percent after a fall of 0.4 percent in July.

On a yearly basis, monthly GDP advanced 0.5 percent in August, in line with estimate. This was faster than the 0.3 percent growth registered in July.

The annual increase in industrial production improved to 1.3 percent from 1.0 percent. On the other hand, growth in manufacturing output eased to 2.8 percent from 3.1 percent in July.

Data raised the hopes that the economy has escaped a recession this year, Capital Economics' economist Ruth Gregory said. However, the recent volatility in the monthly GDP data make it hard to judge the true health of the economy.

As things stand, the economy is not yet in recession but it still does not have much underlying momentum either, the economist noted.

Another data from the ONS showed that the visible trade deficit widened on rising imports of oil and gas. The trade gap rose to GBP 15.95 billion from GBP 13.91 billion in July. The expected level of deficit was GBP 14.7 billion.

Exports decreased 3.7 percent from a month ago, while imports grew 1.8 percent on higher imports of oil and gas.

The surplus on services trade rose only slightly to GBP 12.54 billion from GBP 12.49 billion.

Consequently, the overall total trade gap more than doubled to GBP 3.4 billion from GBP 1.4 billion in July.