The British economy slowed in the three months to November as car manufacturing went into reverse amid the broadest drop in industrial production since 2012.
In a sign of mounting weakness in the economy, with fewer than 80 days to go before Brexit, the Office for National Statistics said GDP growth cooled to 0.3%, down from a rate of 0.4% in the three months to October.
Disruption to factory output from new vehicle emissions tests, as well as stalling demand at home and abroad, contributed to the manufacturing downturn and reflects the widespread problems facing the global car industry.
The latest snapshot comes after Jaguar Land Rover and Ford announced thousands of job cuts, including at least 2,000 in the UK, while figures from China revealed the first drop in car sales for almost 30 years.
Gross domestic product (GDP) measures the total value of activity in the economy over a given period of time.
Put simply, if GDP is up on the previous three months, the economy is growing; if it is down, it is contracting. Two or more consecutive quarters of contraction are considered to be a recession.
GDP is the sum of all goods and services produced in the economy, including the service sector, manufacturing, construction, energy, agriculture and government. Several key activities are not counted, such as unpaid work in the home.
The ONS uses three measures that should, in theory, add up to the same number.
• The value of all goods and services produced – known as the output or production measure.
• The value of the income generated from company profits and wages – known as the income measure.
• The value of goods and services purchased by households, government, business (in terms of investment in machinery and buildings) and from overseas – known as the expenditure measure.
Economists are concerned with the real rate of change of GDP, which accounts for how the economy is performing after inflation.
Britain's government statistics body, the Office for National Statistics, produces GDP figures on a monthly basis about six weeks after the end of the month. It compares the change in GDP month on month, as well as over a three-month period.
The ONS warns that changes on the month can prove volatile, preferring to assess economic performance over a three-month period as the wider period can smooth over irregularities.
The most closely watched GDP figures are for the four quarters of the year; for the three months to March, June, September and December.
The figures are usually revised in subsequent months as more data from businesses and the government becomes available.
The ONS also calculates the size of the UK economy relative to the number of people living here. GDP per capita shows whether we are actually getting richer or poorer, by stripping out the impact of population changes.
Richard Partington
Britain’s industrial sector, which draws together electricity and gas production, water supply, plus mining and quarrying alongside the manufacturing sector, recorded declines across all four industries for the first time since 2012, acting as a handbrake on the wider UK economy.
Manufacturing output, which accounts for about a 10th of the economy, declined for the fifth consecutive month – a first since the 2008 financial crisis.
Despite the weaker levels of industrial production, consumers helped to prop up the economy in November, with the ONS reporting that Black Friday promotions helped lift retail sales as one of the main drivers for economic growth.
The services sector – which accounts for about four-fifths of the British economy and includes shops, hotels and restaurants – gave the biggest boost to GDP growth during the period, while construction also proved positive.
On a monthly basis, GDP increased by 0.2% in November from 0.1% in October, but the annual rate of growth slowed to 1.4% from 1.6% in October.
The slower pace of economic growth comes as the world economy enters a soft patch with US-China trade tensions rising and industrial output falling in several other nations because of the new vehicle emissions tests introduced after the VW emissions scandal.
Economists are forecasting that Germany and Italy could enter recession in the final quarter of 2018, while UK growth is forecast to slow following a strong summer period.
However, the timing will prove problematic for Britain preparing for Brexit, with the risk of supply-chain disruption facing factories and exporters lacking clarity over the future EU trading relationship.
Mike Spicer, the director of research and economics at the British Chambers of Commerce lobby group, said: “These are testing times for many exporters who are feeling the pressure of Brexit uncertainty and broader global issues in the trading environment.
“As the clock ticks ever closer to March, businesses are becoming increasingly frustrated and looking to Westminster for clarity and precision on the future terms of trade. Firms need to know what customs procedures they will face with their nearest neighbour and other important partners in just over 10 weeks.”
Amid the cooling global economy, the sharp fall in the value of the pound since the EU referendum should have acted to make British exports more attractive. However, the UK’s trade in goods deficit – the gap between imports and exports – unexpectedly widened to £12bn in November from £11.9bn in October.
Samuel Tombs, the chief UK economist at the consultancy Pantheon Macroeconomics, said that, although world trade had slowed, Britain was still underperforming. “The fall in exports also suggests that overseas firms have become reluctant to source goods from UK firms due to concerns about the disruption that might result from Brexit,” he said.
