·
As in the US, GDP in the UK was revised higher for Q3. From 0.6%
reported a month ago, it was raised to 0.75%, the largest quarterly
growth rate since the first quarter of 2001. The year-on-year growth
rose to 2.0% from 1.9% reported initially. This is marginally
faster than in Q2, making the best four-quarter performance since the
middle of 2001.
· Construction activity, up 2.5% on the quarter, and production of business services, up 1.0%, were both larger than originally estimated. Weakness remains, however, in manufacturing, mining, and transportation.
· By type of expenditure, consumers and non-profit institutions continue to lead the UK expansion. Business investment has been erratic, falling in this latest period by 1.6%, which reversed a 2.0% advance in Q2. After the pre-Y2K buildup, a 12-quarter growth trend in private capital spending has been ratcheting lower, just piercing zero to -0.3% in Q3 (see chart nearby). More optimistically, recent movement in business investment has been less negative and these expenditures might firm up in coming months if domestic demand continues to grow and as the UK's trading partners also see renewed expansion that could lift foreign demand for its products.
· Notably, unlike other countries, exports have not been a leader in recent UK growth. They were basically unchanged in Q3 and four-quarter "growth" is down at -4.3%. Imports have been relatively flat in recent periods, but the softness in exports has produced a net export deficit (in volume terms) averaging £11.3 billion over the last four quarters, a record by far. One assumes, however, that continuing prosperity among the UK's neighbors would help narrow that trade imbalance.