Services strength underpinning rebalancing

For all the (justified) doubts over the accuracy of the headline growth rates, the third quarter GDP data provide evidence of encouraging shifts in the economy. According to the official data, services are growing faster than a year ago, even though industry and construction have slowed. Given that the bulk of the distortions in the GDP data appear to be in the growth rates for industry, the true gap in performance is probably even wider than the official figures show. The resilience of the service sector explains why the labour market still appears healthy despite the undoubted difficulties of parts of the economy. In turn, continued strong wage and job growth underpin our cautious optimism that the economy is rebalancing to a more sustainable, less investment-intensive growth model.