Business

UK growth estimate revised down to 0.4% for third quarter

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The UK economy grew by 0.4% in the third quarter of the year, figures show, less than previously estimated.

The rate was revised down from 0.5% because the key services sector, which accounts for well over 70% of UK economic activity, grew more slowly than had been thought.

It is the third estimate for the quarter from the Office for National Statistics (ONS).

The ONS also cut its estimate of second quarter GDP growth from 0.7% to 0.5%.

In annual terms, growth in the third quarter of the year was revised down to 2.1% from the previous estimate of 2.3%.

The UK economy has been growing for 11 consecutive quarters.

A Treasury spokesman said in a statement that the figures highlighted that risks to the UK economy remained despite it being "the fastest growing economy in the G7 last year".

"We're leading the pack with the US this year, we have a record high employment rate and the deficit is down," the Treasury said.

Fragile

Simon French, chief economist at stockbrokers Panmure Gordon, said the figures added to a picture of a fragile economy: "It's been a bad 24 hours for the chancellor with bad public sector borrowing numbers [on Tuesday]. It is the fourth of seven quarters where the ONS growth estimate overestimated the strength of of the economy.

He said the most worrying part was the weakness of the service sector, which is the engine of the UK economy.

Other figures released on Wednesday showed scant prospect of a pick up in that.

Figures for the service sector in October - the first month of the fourth quarter - only grew 0.1% between September and October, suggesting fourth quarter GDP has made a slow start. The previous month the index grew by 0.5%.

Martin Beck, senior economic advisor to the forecasting group EY ITEM Club, said the full picture had not yet emerged: "Given the extent to which the economy has benefitted from very low inflation and the degree of spare capacity, this should really have been a year where the economy grew in excess of 3%.

"However, recent experience suggests that we should not write off 2015 just yet, given the clear tendency for the GDP data to eventually be revised up over subsequent years."

US economic growth was also revised down this week, but despite that slight weakening, the US economy is perceived by its central bank to be strong enough to withstand a rise in interest rates. Borrowing costs were raised by the Federal Reserve for the first time in nine years last week.

The Bank of England is widely expected to hold back from following the Fed's lead until well into 2016.

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