How does the UK’s performance in 2019 compare to other countries?
Well,as this chart shows, the UK was one of the faster-growing G7 companies in January-March, and the fastest-shrinking in April-June.
The ONS explains:
There has been a slowdown in the euro area in the latest quarter, largely reflecting the contraction in the German economy where GDP fell by 0.1%.
Having entered a technical recession in the second half of 2018, the Italian economy continues to perform in a subdued manner as there was no pickup in GDP in Quarter 2. French GDP maintained its quarterly rate of growth of 0.3%. Having increased by 0.8% in Quarter 1, US GDP growth slowed to 0.5% in the latest quarter.
PcW: Brexit uncertainty hits investment
John Hawksworth, chief economist at PwC, says today’s “GDP Blue Book data” shows an economy propped up by consumer spending, and riddled with weak business investment.
UK GDP is still estimated to have fallen by 0.2% in the second quarter after an upwardly revised rise of 0.6% in the first quarter of this year. This volatility largely reflects Brexit timing effects and the underlying trend is still for modest GDP growth at an average of around 0.2% per quarter, or just under 1% per year. Early indicators are that growth continued at a similar modest rate in the third quarter.
Household spending has moderated somewhat to an average of around 0.3% per quarter over the past year, but has remained consistently positive, supported by continued jobs growth and increased real earnings. But total investment in the economy has been much more volatile, falling in four of the past six quarters as businesses remain cautious about investing in the face of Brexit-related uncertainty and a slowing global economy.
The service sector was the only part of the UK economy to expand in the last quarter, by just 0.1%.
Production, construction and agriculture all contracted, according to today’s updated growth report:
Biggest slump in production output since 2012.
Worryingly, the ONS has calculated that production output fell by a downwardly revised 1.8% in April-June. That’s the largest decline since the end of 2012.
This was driven by a revised 2.8% fall in manufacturing output — partly due to the car factory stoppages.
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The ONS says there’s evidence that stockpiling boosted growth in January-March, lifting GDP by a punchy 0.6%.
But, those stocks were then run down in the second quarter, when GDP shrank by 0.2%.
The ONS also points out that car factories were briefly shuttered in April:
Furthermore, it was also reported that a number of car manufacturers had brought forward their annual shutdowns to April as part of Brexit-related contingency planning.
UK annual growth revised up
Breaking: Britain’s economy has grown a little faster than previously thought over the last year.
New GDP figures from the Office for National Statistics show that the economy expanded by 0.6% in January-March, up from 0.5%. A burst of stockpiling ahead of the original Brexit deadline is partly responsible.
This lifted the annual growth rate to 1.3%, from 1.2%.
However, the UK still contracted by 0.2% in April-June (as that stockpiling boost faded)
Anxiety over the US-China trade war is keeping European stock markets subdued today.
The main indices are mostly down, a little, after it emerged that American investors could be curbed from investing in China. The White House is also considering blocking Chinese firms from listing on the New York stock exchange, according to insiders.
Beijing’s state media has hit back at these reports, criticising the US for trying to decouple from China.
The Global Times warned that such a decoupling wouldn’t be easy, and would have “significant repercussions for the Chinese and US economies, as well as their companies, in the future.”
China also pledged to take new steps to support its economy, ahead of a new round of trade negotiations next month.
UK businesses are also at risk from a Chinese hard landing.
Official data released today showed that China’s factory output continued to contract this month. This manufacturing PMI rose to 49.8, from 49.5 — the fifth straight month of contraction but closer to the break-even 50 point mark.
Service sector companies are still growing, though:
Despite UK PLC’s obvious concerns, the government insists that Britain could handle a no-deal Brexit.
Chancellor Sajid Javid has been speaking this morning, ahead of his speech at the Conservative Party conference. He told the BBC that leaving the EU without a deal was possible (despite the Benn Bill ruling it out!).
Javid said:
It’s not our preferred outcome. We are working incredibly hard to get a deal by October 31.
But if we do not manage to do that, we do still need to leave the EU on that date – we cannot have any more dither and delay, and we will leave if we have to, without a deal, on October 31.
Javid also pledged there would be a “significant economic policy response’ if there was no deal — but couldn’t say how much it would cost.
The CBI, which represents Britain’s bosses, has also lashed out the government over its handling of Brexit.
Over the weekend, it reported that private sector activity had shrunk in the last quarter, and will probably keep shrinking at a faster pace in the next few months.
Rain Newton-Smith, CBI chief economist, said:
“Decision-makers in boardrooms across the country have been watching politics this week with a heavy heart.
“Despite all the noise, what must not be forgotten is the importance of getting the UK economy back on track, by supporting investment and innovation which is the bedrock of productivity, and higher living standards.
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Introduction: UK economy dogged by Brexit worries
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
With just a month until the Brexit deadline, business leaders are growing increasingly pessimistic about the outlook for the UK economy.
Economic optimism across British companies has fallen to a three-year low, hitting levels not seen since the 2016 EU referendum.
The Lloyds Bank Business Barometer shows that companies’ concerns about the UK leaving the EU have intensified. Around 43% of bosses believe Brexit will have a negative impact, up from 39%. Just 18% believe it will be positive, down from 21%.
These charts from the report show how confidence has fallen, as Brexit fears have risen:
The survey also found that:
- Economic optimism fell 5 points to -10%, its lowest since June 2016, while overall business confidence¹ was steady in September, edging up 1 point to 2%.
- Firms’ assessment of their trading prospects for the year ahead rose by 5 points to 13%, but remained at its second lowest this year.
- Firms’ concerns about the expected impact of the UK leaving the EU intensified, falling 7 points to a new low of -25.
Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, says the possibility of a disorderly Brexit is worrying businesses:
“While overall business confidence this month has remained broadly steady, optimism in the economy has fallen, and both remain significantly below the same period last year, and the historic average.
This month we are also seeing firms’ concerns about leaving the EU intensify against the backdrop of ongoing economic uncertainty.”
Something for the government to ponder as the Conservative Party conference in Manchester, where the prime minister’s conduct is under scrutiny again.
Also coming up today
The final reading of UK GDP for the second quarter of 2019 is due this morning. It will give more insight into the UK economy, and probably confirm that it only grew by 1.2% over the last year (including a 0.2% contraction in April-June).
New UK mortgage approvals and consumer credit figures are due this morning, and could show whether Brexit uncertainty is deterring people from moving house or hitting the shops.
Mortgage lending is expected to dip to £4.2bn, down from £4.61bn in July.
The agenda
- 9.30am BST: UK national accounts for second-quarter of 2019
- 9.30am BST: UK mortgage approvals and consumer credit
- 10am BST: Eurozone unemployment
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