25 October 2002, 09:04 U.K. Economy Probably Grew 0.6% in Third Quarter, Analysts Say
/www.bloomberg.com/ By Julia Kollewe
London, Oct. 25 (Bloomberg) -- The U.K. economy probably expanded at about the same pace last quarter as in the previous three months, analysts said in advance of a government report.
Gross domestic product rose 0.6 percent compared with the second quarter, according to the median survey of 22 economists surveyed by Bloomberg News. From a year earlier, Europe's second- largest economy grew 1.6 percent.
Manufacturing probably grew in the third quarter after shrinking the most in more than two decades in June, economists said. Growth may slow in coming months as a decline in stocks and dwindling exports persuade some companies to postpone investment and the global economies stagnates. The benchmark FTSE 100 Index is down 21.3 percent this year.
``The fourth quarter is looking less promising,'' said Trevor Williams, an economist at Lloyds TSB Bank Plc. ``There is room for another interest-rate cut.''
Concern the global recovery and U.K. consumption are slowing may push the Bank of England to add to last year's seven interest rate reductions, analysts said. Three members of the bank's nine- member Monetary Policy Committee voted to lower rates on Oct. 10, the first votes for a reduction since February.
The government will release the growth figures at 9:30 a.m. London time.
Slowdown Ahead
The U.K. is growing quicker than most of the world's largest economies. Germany's economy expanded 0.3 percent in the second quarter, Italy grew 0.2 percent and French gross domestic product increased 0.5 percent. The U.S. economy grew at an annual rate of 1.3 percent.
Consumer spending, which fuels about two-thirds of the economy, kept the U.K. growing last year while Germany, the U.S. and Japan sank into recession. Spending was spurred by the lowest borrowing costs in 38 years.
Still, there are signs consumption is slowing. Retail sales growth slowed to 0.4 percent in September from 0.7 percent the previous month, government figures released yesterday showed.
``U.K. domestic demand (though not total demand) had been less strong over the second and third quarters than expected,'' according to the three policy makers who voted for a cut, the Bank of England's minutes said.
``Without a pre-emptive repo rate reduction now, domestic demand growth might fall faster than currently envisaged, leaving inflation below target for longer,'' the minutes said.
Manufacturing, which accounts for about a fifth of the economy, may also falter. Confidence among producers fell for the first time since January this month and factory orders worsened, a survey by the Confederation of British Industry, the country's largest business lobby, shoed this week.
The economic recovery in the U.S. and the dozen countries sharing the euro has stalled, reducing demand for British goods. The euro economy will grow less than 1 percent this year, the slowest since 1993, the European Commission predicts.
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