Economic outlook remains gloomy, with negligible growth expected in Q4 - ITEM Club respond to today's GDP figures

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Nida Ali, economic advisor to the EY ITEM Club, comments on today’s GDP figures:

  • No major surprises in today’s GDP release
  • The outlook remains gloomy, with negligible growth expected in Q4
  • These figures will have no bearing on monetary or fiscal policy

“Despite minor revisions to production and construction, it’s heartening that overall GDP was not revised down. The expenditure breakdown is also fairly unsurprising. Most components that fell in Q2, such as consumer spending, bounced back in Q3, which is what we were expecting. 
 
“However, these figures do little to change the broader picture of a fragile economy. The majority of the strength in Q3 was a result of one-off factors such as the extra Bank holiday in Q2 and a boost from the Olympic Games. But the near-term outlook is pretty gloomy, with monthly economic indicators pointing to negligible growth in the fourth quarter.
 
“Consequently, these results will have no bearing on monetary or fiscal policy. The latest Inflation Report already saw the Bank downgrading its growth forecasts in the medium-term, and we are likely to see similar downgrades to the OBR’s growth forecasts in December’s Autumn Statement. Therefore, if at all, any policy measures in the coming months will probably be expansionary.”