Economy slows, but growth still steady

GDP growth slowed to 0.5% in 2015 Q3, down from 0.7% in the previous three months. The services sector continued to drive the recovery and saw increases in all 4 of the main services aggregates. Disappointingly the manufacturing sector continued to contract, with output now estimated to have fallen 0.9% this year. There was also a heavy fall in construction output, of 2.2%.

The details of the first estimate for 2015 Q3 showed that within the services sector:

  • distribution, hotels and restaurants increased by 0.8% in Q3, with retail trade, except of motor vehicles and motorcycles making the largest positive contribution to the increase.
  • transport, storage and communication increased by 1.3% in Q3 with computer programming, consultancy and related activities making the largest contribution to the increase.
  • business services and finance increased by 1.0% in Q3 with real estate activities making the largest positive contribution to the increase.
  • government and other services increased by 0.1% in Q3 with human health activities making the largest positive contribution to the increase.

While overall growth slowed in Q3, the expected GDP growth rate of 2.5% in 2015 and 2.3% in 2016 is very satisfactory given the headwinds persisting in the global economy and on-going fiscal austerity at home.

In addition, other key economic indicators provide a solid platform for growth further out: inflation remains near zero obviating the need for an early tightening of monetary policy; the labour market is buoyant including strengthening wage growth; productivity appears to be picking up and investment and consumer spending are supported by high levels of confidence.