By Joe Wallace 
 

The U.K. economy steadied over the summer, as a robust expansion in the dominant service sector offset a deterioration in manufacturing activity, according to data released Thursday.

The pick-up in growth suggests the U.K. avoided falling into a recession in the third quarter, after contracting in the second quarter.

The Office for National Statistics said Thursday that gross domestic product--a broad measure of the goods and services produced in an economy--grew at an annualized rate of 1.2% in the three months through August. Television and film production helped boost the services sector, which accounts for around 80% of U.K. output.

But a continued downturn in manufacturing activity offered further evidence of a global slowdown in factory activity, which is causing particular pain in open economies such as the U.K. and Germany. Overall manufacturing output dropped by 1.7% from a year earlier in August, the ONS said, and 10 out of 13 manufacturing industries declined from July.

The data, released three weeks before the government plans to pull the U.K. out of the European Union, show the U.K. economy weathered rising political uncertainty over the summer months. That uncertainty has increased in recent weeks, as Prime Minister Boris Johnson has insisted the U.K. will leave the bloc with or without an agreement by the end of October, even though lawmakers have legislated to avoid a disruptive no-deal Brexit.

Officials at the Bank of England are concerned that the lack of clarity about when and how the U.K. leaves the EU is permanently hurting the U.K.'s productive capacity.

"For some firms--especially those with operations in more than one country--the logical response to persistently high uncertainty in the U.K. is to divert investment, supply chains and business relationships away from the U.K. to other countries," Michael Saunders, who sits on the BOE's Monetary Policy Committee, said on Sept. 27. "That spending may be permanently lost, rather than simply deferred," he said.

Write to Joe Wallace at joe.wallace@wsj.com

(END) Dow Jones Newswires

October 10, 2019 05:12 ET (09:12 GMT)