The U.K. economy narrowly avoided slipping into recession last quarter, according to data published Monday, but weak growth is likely to continue into next year as the country continues to grapple with its Brexit challenges and a deadlocked electorate.
Britain's economy grew 0.3% over the three months ending in October, the Office for National Statistics estimated, a rate that missed analysts' forecasts of 0.4% but bounced back from the -0.2% reading for the second quarter, meaning the economy avoids falling into recession. Consumer spending added 0.25% to overall growth, the data showed, as the nation's job market continues to show surprising resilience despite the Brexit uncertainty.
"GDP grew steadily in the third quarter, mainly thanks to a strong July," the ONS said. "Services again led the way with construction also performing well. Manufacturing failed to grow as falls in most industries were offset by car production bouncing back following April shutdowns."
The pound was marked 0.6% higher on the session against the U.S. dollar at 1.2879 following the GDP data, helping send the benchmark FTSE 100 -- which is comprised of companies that earn more than 75% of their revenues overseas -- more than 1.1% lower by mid-day trading in London.
"All in all, we think the economy is probably growing at a pace of roughly 0.2% per quarter," said ING economist James Smith. "For now, we think the Bank of England will probably avoid cutting interest rates in the near-term, although a lot depends on Brexit, and whether the jobs market deteriorates further."
The data comes as Britons prepare for their third general election in four years next month, with candidates from both the ruling Conservative Party and the Opposition Labour Party focusing their campaigns on Britain's post-Brexit future.
Prime Minister Boris Johnson was forced to seek a third delay to the country's EU exit data last month from officials in Brussels after losing a series of votes in Parliament to push through a Brexit deal he quickly abandoned in early November.
Johnson, who holds a commanding 12 point lead in early polls over his Labour rival, Jeremy Corbyn, is pinning his electoral hopes on the idea of "Getting Brexit Done", with an appeal to voters that supported leaving the European Union in June of 2016.
He was also given a significant boost to concerns for erosion to that support from Nigel Farage, the leader of the U.K.'s newly-formed Brexit Party, who had threatened to run hundreds of candidates in Conservative controlled seats.
Farage said Monday that Brexit Party candidates won't stand against Johnson's Conservatives in the 317 seats they won in 2017, giving them free-reign to fight against left-leaning Labour candidates while not splitting the center-right vote between rival parties.
That said, Britain's complicated electoral arithmetic, as well as the resurgence of the staunchly anti-Brexit Liberal Democrats, means a so-called "hung Parliament" -- in which no party commands a majority in the 650-seat House -- is perhaps the most likely outcome, a result that could mean many more months of political deadlock and anemic economic growth.
"The UK economy has been in stop-start mode all year, with growth punctuated by the various Brexit deadlines. Indeed, the pick-up in the third quarter numbers may slightly exaggerate the strength in the economy, with some activity likely to have been brought forward before October 31st. The final quarter of 2019 could be weaker as stockpiles continue to be run down.
"While high employment has provided some support for the economy, underlying weaknesses in investment and productivity still need addressing," said Tej Parikh, chief economist at the Institute of Directors business lobby.
"With uncertainty likely to persist and a continued slowdown in global markets, the onus is on the new government to stimulate economic activity and move the UK beyond its current yo-yo pattern of growth," he cautioned.