UK GDP: British economy is stagnating as Brexit uncertainty hits growth – businss live

It’s not all doom and gloom.

UK growth in the third quarter of 2019 has been revised up to show 0.5% growth, from 0.4%.

And in the second quarter (hit by Brexit-related factory closures), the economy only shrank by 0.1% not the 0.2% expected.

That doesn’t take away from the disappointing stagnation in Q4, but shows that 2019 was a little better than thought (but still far from sparkling).

At the risk of aping Norman Lamont, there are some small green shoots of recovery peeking out of today’s UK GDP report.

Services, manufacturing and construction did all manage some growth in December. That helped to grow the economy by 0.3%, after a torrid November in which services and manufacturing both shrank.

That could be a sign that confidence picked up after the general election — something which business surveys have already reported.

Here’s some instant reaction to the UK economy’s failure to grow in the final quarter of 2019, despite a pick-up in December:

Brexit uncertainty is to blame for Britain’s volatile (and mediocre!) growth in 2019.

So says the Office for National Statistics in today’s December growth report (which also gives a picture of the whole year).

The ONS says:

The volatility in 2019 can be seen to some extent in all headline sectors, but most notably in production and construction. However, while construction data can often be volatile, the recent volatility in the production sector has been notable, coinciding with the UK’s two previously planned departure dates from the EU.

Despite this, the underlying picture for production was one of weakening throughout 2019, with nine months of the year showing negative rolling three-month growths.

During 2019, the UK economy grew by 1.4% – up from 1.3% in 2018.

That’s two years of rather weak, sub-trend, growth.

Today’s GDP report also shows that the manufacturing sector had a grim year, shrinking by 1.5%.

Here’s the ONS’s Head of GDP, Rob Kent-Smith, on Britain’s flatlining economy:

“There was no growth in the last quarter of 2019 as increases in the services and construction sectors were offset by another poor showing from manufacturing, particularly the motor industry.

“The underlying trade deficit widened, as exports of services fell, partially offset by a fall in goods imports.”

Britain’s service sector grew by a paltry 0.1% in the final quarter of 2019, today’s GDP report shows.

But manufacturing did badly again — slumping by 1.1% in October-December. The broader measure of industrial production shrank by 0.8%.

The construction sector grew by 0.5%.

Newsflash: The UK economy stagnated in the final quarter of 2019, with no growth at all.

But in December alone it grew by 0.3%, reversing its slump in November, according to the Office for National Statistics.

More to follow….

Just five minutes to go until we learn whether Britain ended 2019 with a bang or a whimper….

City economists reckon UK GDP may have risen 0.2% in December – but that wouldn’t make up for November’s 0.3% slide….

Here’s Paul Donovan of UBS Wealth Management on today’s UK GDP report (due in 35 minutes):

Investment spending is likely to be negative, driven down by the uncertainties caused by US President Trump’s trade taxes and the interminable EU-UK divorce.

Online grocer Ocado has today confirmed what you may already have suspected — a major warehouse fire is rather bad news for profits.

Ocado has reported a £214.5m loss for 2019, rather worse than the £44.4m loss a year earlier.

Although revenues jumped 10%, this was wiped out by the impact of a huge blaze at its warehouse in Andover last year

John Moore, senior investment manager at Brewin Dolphin, says this loss has taken the shine off Ocado’s recent technology deals abroad.

“Ocado has delivered decent revenue growth and a range of new partnerships in the last 12 months, but its loss for the year is well beyond analyst expectations. While the impact of the Andover facility fire will account for some of this, the scale of the loss may have some market watchers concerned.

Looking underneath the cashflow figures the UK has turned positive, but investment in the international business has pushed the scale of cash outflow higher.”

City traders appear to be hoping that central bankers will save the day (again) if the global economy stumbles:

Boom! European stock markets have hit a record high in early trading.

The Stoxx 600, which tracks the largest six hundred companies across Europe, has gained 0.6% at the open to a new peak.

In London, the FTSE 100 is up 54 points or 0.7% at 7500. Airline and holiday stocks are leading the way, with TUI surging 11% and easyJet up 3.3%.

Traders appear to be more optimistic that the coronavirus crisis will not cause serious damage to the global economy.

Even though the death toll has now passed 1,000, there are signs that the infection rate may be slowing.

But with the death toll now over 1,000, and predictions that 60% of the world’s population could catch the virus, this relief could be premature….

Overnight, we’ve seen that UK retailers aren’t enjoying this alleged ‘Boris Bounce’.

The latest data from the British Retail Consortium shows that spending only rose modestly in January, and actually shrank over the last three months.

My colleague Larry Elliott explains:

The monthly BRC/KPMG health check of the retail sector found that total sales rose by 0.4% in January but were unchanged once increases in floor space were taken into account.

Over the latest three months – a better guide to the underlying trend because it includes Black Friday bargains in November, the peak Christmas spending weeks in December and the January sales – food and non-food takings were down.

Canaccord Genuity Wealth Management investment manager Dan Smith believes the UK economy could actually have shrunk over the last quarter [City consensus is for 0% growth]

“Considering December was a month plagued by political uncertainty and retail sales have already shown a more cautious consumer over the period, this figure looks challenging.

While a contraction in activity over the quarter will likely dampen sentiment towards the UK, it may not totally alter the outlook for 2020, as recent data has shown enough green shoots to raise hopes for a Boris bounce.”

Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, is more sceptical about this bounce given the struggle to agree a UK-EU trade deal….

. Today’s data could confirm an anemic growth in the four the quarter, and a stagnant industrial and manufacturing production in December. The fact that business surveys in January hinted at a bounce in activity posterior to Boris Johnson’s victory may attenuate the impact of soft production and growth data.

But the optimism in surveys is now being eaten up as investors realize that the second – and the most decisive phase of Brexit negotiations will likely continue weighing on businesses. In fact, avoiding an immediate no-deal Brexit didn’t necessarily save the UK from walking out of the EU without a deal at the very end.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Today we discover how well, or badly, the UK economy fared in the final three months of 2019 in the face of Brexit tensions, a general election, and a slowing European economy.

It may not be a pretty sight. Economists predict that growth fizzled out in the last quarter, with GDP likely to be unchanged compared to Q3 (when the economy grew by 0.4%).

On an annual basis, growth may have slumped to just 0.8% year-on-year — a very weak performance.

We learned last month that the economy shrank by 0.3% in November alone – so it’ll take something special in December to avoid a disappointing end to a troubled year.

2019 was a choppy year for growth. Two Brexit deadlines forced firms and households to stockpile goods, only to then run them down again, while consumer confidence and business investment were both knocked.

Economists reckon that the UK service sector was probably stagnant during Q4, with manufacturing shrinking and construction growing. We’ll find out at 9.30am, along with new trade and industrial production data too.

Also coming up today

Three top central bankers will vie for the limelight.

ECB chief Christine Lagarde is testifying at the European Parliament, Fed chair Jerome Powell is appearing before Congress, and outgoing Bank of England governor Mark Carney is at the House of Lords.

Doubtless we’ll hear about growth prospects, interest rate moves, climate change, and the coronavirus.

The agenda

• 9.30am GMT: UK GDP for October-December 2019: expected to be flat, after 0.4% growth in July-September

• 2pm GMT: Christine Lagarde at the European Parliament in Strasbourg

• 3pm GMT: Jerome Powell at the House Financial Services Panel

• 3.35pm GMT: Mark Carney at the House of Lords economic committee