Recovery regaining pace, but looking unbalanced

The UK economy appears to be regaining a little momentum, but the nature of the recovery is looking quite unbalanced. The breakdown of Q3’s 0.5% quarterly rise in real GDP showed solid growth in domestic demand, but a 1.5 percentage point drag from net trade – the biggest on record. Although there has been some suspicious volatility in the trade data over the past couple of quarters, net trade was also a drag on the annual growth rate. Meanwhile, the Markit/CIPS activity balance strengthened in the services sector in November, but weakened in the manufacturing and construction sectors. While this is not the ideal shape for the recovery, at least there are not many signs yet of an unsustainable rise in lending. And the services sector looks able to keep shouldering the burden of growth for a while.