Revised third-quarter GDP figures released today confirm a 0.5% quarterly decline. From the expenditure side, a 2.4% fall in capital spending contributed 0.4pp to the GDP drop, with consumer spending, inventories and trade each adding a further 0.1pp. The only positive was a rise in government consumption, contributing 0.2pp.
The extent of the weakness in capital spending was surprising given business investment figures released yesterday, showing a decline of only 0.2%. This suggests a large fall in housing investment, consistent with starts data and anecdotal evidence.
National Statistics also released September figures on services output. This series can be combined with industrial production to create a monthly GDP proxy – the two sectors account for 93% of gross value added. The chart below shows quarterly GDP with this monthly indicator.
The July reading of the monthly series was equal to the second-quarter average. The quarterly GDP decline reflected marked weakness in August and September, partly due to the escalating financial crisis. Monthly output fell by 0.8% in August and September combined.
The late-quarter deterioration implies a negative carry-over into the fourth quarter – September output was 0.3% below the third-quarter average. Together with recent very weak business surveys, this suggests a GDP decline of more than 0.5% in the current quarter.
