UK Economic Growth 'continues To Stabilise' Showing Only 'modest' Brexit Jitters

Economic growth in the United Kingdom further stabilised in the third quarter, suggesting the negative impact of the country's vote to leave the European Union has been relatively modest to date, according to fresh research.

Ratings agency Moody's recently published Brexit Monitor notes that growth indicators paint a mixed picture at the start of the fourth quarter. Surveys suggest that overall GDP has continued to expand, led by services, but retail spending by consumers and sentiment has been muted.

Overall, the slowdown in consumption growth in 2017 has been accompanied by a recovery in the UK's trade balance year-on-year.

Hiring intentions data suggest that muted labour market growth will continue, while a further moderation in residential house price inflation is expected in the months ahead, Moody's observed.

"UK economic growth continued to stabilise in the third quarter, reaffirming our view of a moderate negative impact of Brexit on the economy so far," said Colin Ellis, managing director at Moody's and co-author of the Brexit Monitor.

"Producer prices pressures, which have subsequently been reflected in higher consumer prices since the vote to leave, cooled significantly in October, consistent with our expectation of inflation peaking over the coming months," he added.

The rating agency said businesses expect investment to expand, albeit gradually, as the rebound in capital spending intentions throughout 2017 stagnated in recent months, with volatility increasing in the services sector.

Financial conditions are set to "tread water" in the near-term as markets see limited scope for a further increase in policy rates in 2018 after the Bank of England's 25 basis points interest rate hike in November.

"The key political developments since the last Brexit Monitor has been the EU still seeing insufficient progress on the topics of the Irish border and financial settlement in the negotiations since EU-27 leaders have urged closer agreements to be achieved before launching talks on the UK's future relationship with the EU," Moody's concluded.

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