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III

Demand and output

A21 Quarterly GDP had risen by 0.7% in Q3, unrevised from the preliminary GDP release. Manufacturing output growth had been 0.6% in Q3, up from 0.4% in Q2, while service sector growth had slowed to 0.7% from 0.9%. Construction output had grown by 0.4% in Q3. Within the service sector, the growth in business services had slowed to 0.8% in Q3 from 1.3% in Q2. Growth in distribution, hotels and catering had been revised upwards to 1.2% in Q3 from the preliminary estimate of 0.7%. A22 On the expenditure side, household consumption growth had been 1.0% in Q3, compared with 0.8% in Q2. The Office for National Statistics (ONS) had indicated that the strength in consumption had been partly accounted for by higher spending on household durables, clothing and footwear, and transport and communications. Real government spending had increased by 0.6% in Q3. Net trade had contributed -0.6 percentage points to GDP growth in Q3. Total exports of goods and services had grown by 1.7% and imports by 3.0%. Inventories had contributed 0.4% to GDP growth. A23 Total investment had grown by 0.5% in Q3, but investment excluding valuables had been flat. Business investment had grown by 0.7%. Within this, service sector investment growth had fallen to 1.7% in Q3 from 2.2% in Q2. Manufacturing investment had grown by 0.3%. The gross operating surplus of UK corporates had increased by 1.7% in Q3. A24 Turning to indicators of Q4 activity, retail sales volumes had been flat in October, suggesting little adverse effect from the recent flooding. The CBI Distributive Trades Survey reported that the retail sales balance had increased to +13 in November from zero in October. The British Retail Consortium had reported slightly stronger sales in November. Total car registrations had increased by 2.6% in October on a year earlier, while private car registrations had increased by 14.1% over the same period. The GfK aggregate consumer confidence balance had fallen slightly to -2 in November from zero in October. But the survey had been conducted in early November and confidence might have been adversely affected by uncertainty concerning possible fuel protests. A25 There had been signs that house price inflation had picked up after falls earlier in the year. The Nationwide index had increased by 0.9% in November following a similar increase in October.