LONDON--Trade and construction held back Britain's economic growth in the third quarter, a fresh batch of official data suggested Friday, confirming earlier signs of a slowdown.
The U.K. bought abroad 3.3 billion pounds ($5 billion) more in goods and services than it sold to the rest of the world, the Office for National Statistics said. The gulf is GBP1.2 billion narrower than July's, which was the widest in more than half a year, but both months combined already double the deficit registered in the second quarter. This means trade would need to be in surplus in September in order to make a positive contribution to economic growth in the third quarter, a virtual impossibility because it hasn't happened since 1998.
Meanwhile, weather and summer stoppages drove construction output to fall 4.3% on the month--the largest drop in over two and a half years--after dipping in July as well.
Friday's data add to a hefty amount of indicators showing Britain's economic expansion lost some luster between July and September. Many economists believe official data set to be released later this month will reveal the economy grew 0.5% in the third quarter, compared with 0.7% in the second. The Bank of England, however, remains more optimistic: In a set of forecasts released Thursday, officials at the central bank said the pace of economic growth was likely to be 0.6%.
While government statisticians point out construction figures are unreliable and have lately been prone to upward revisions, the U.K.'s weak trade performance has long been a key concern of policymakers and business chambers.
Exporters have been severely hampered by the strength of the pound, business surveys reveal, which makes British products more expensive overseas. In August, sterling hit its highest value in seven and a half years when measured against a basket of other major currencies, according to data by the Bank of England.
Even though the pound has since climbed down--easing about 3% in September--it remains strong against the euro, making it hard for U.K. firms to tap their number one market for exports. According to a key poll of purchasing managers released last week by research firm Markit Economics Ltd., output by British manufacturers slipped to a three-month low in September.
This leaves the British economy solely reliant on its powerhouse services sector, which has also given signs of slowing in recent months. Still, in records of their last policy meeting, BOE policymakers said recent economic data is consistent with a "gentle deceleration," a natural consequence of the economy approaching a balance after emerging from the downturn.
Write to Jon Sindreu at jon.sindreu@wsj.com and Jason Douglas at jason.douglas@wsj.com
