Fresh data show UK growth slowing

A set of weaker than expected data in retail, housing and manufacturing has fuelled the impression that the speed of economic growth in the UK is moderating.

Official gross domestic product figures for the third quarter will be published on Friday morning, with most analysts expecting the pace of growth to have slowed a little from the 0.9 per cent recorded in the second quarter.

Retail sales data, out on Thursday, showed that the quantity of goods bought fell 0.3 per cent in September compared with August, as the unusually warm autumn knocked clothing sales.

Separate figures from the British Bankers' Association on lending by the high street banks chimed with other recent indicators that the housing market is slowing. It reported that approvals for house purchases in September were 10 per cent lower than a year ago, with approvals for remortgaging and equity release also falling.

And the Confederation of British Industry's industrial trends survey reported that while the recovery in manufacturing is still on track, growth slowed as new export orders fell and the survey's total orders balance hit a 15 month low.

Rain Newton-Smith, director of economics at the CBI, said the manufacturing sector is facing challenges. "Global political instability, mounting concerns about weakness in the eurozone and recent rises in sterling are all weighing on export demand," she said.

A weaker manufacturing performance means the responsibility for economic growth will rest heavily on the dominant service sector, dashing rebalancing hopes.

Sterling extended its decline against the US dollar on Thursday, falling 0.4 per cent to $1.6016 in its third consecutive day of falls as the softer data reinforced belief that the Bank of England is unlikely to raise interest rates before next summer

But overall city economists remained largely sanguine about the health of the economy.

Alan Clarke, economic at Scotiabank, said that while there are signs of cooling there was "nothing sinister".

"It is just that - cooling off not an arctic chill," he said.

Rob Wood, chief UK economist at Berenberg Bank, said the softer retail numbers fitted the general pattern of a slight slowdown. While there was no cause for "serious worry," he said, "British growth is gently slowing as several domestic and external headwinds blow a bit stronger."

While the retail figures were weaker than expected, the greatest decline came in the textile, clothing and footwear category which was down 7.8 per cent compared with August and 4.1. per cent on the previous year.

The Office for National Statistics said on Thursday that feedback from retailers suggested the fall was a result of "unseasonably warm weather, meaning consumers have delayed purchases of autumn and winter clothing".

The overall quantity of sales increased 2.7 per cent compared with the previous year. This marks the 18th consecutive month of year-on-year rises, the longest period of sustained growth since the financial crisis.

Victoria Clarke, economist at Investec, said that while she expected retail sales to bounce back, the mortgage approvals numbers had less of a silver-lining.

"They do genuinely appear to provide further evidence of the UK's housing recovery having got itself stuck in the mud", she said.

Richard Woolhouse, chief economist at the BBA, said that while a year ago there was concern about the "heady pace" of property price rises, the latest numbers "suggest we are now experiencing a steadier housing market and that's no bad thing".

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