UK economy grows faster than expected ahead of Brexit

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Stockpiling by producers ahead of Brexit helped the UK economy grow by 0.3% in the three months to February.

The Purpose for National Statistics pointed to manufacturers “changing the timing of their actions” as the UK’s exit from the EU approaches.

Although growth was stronger than the 0.2% scads economists forecast, Rob Kent-Smith, head of GDP at the ONS, said growth “remained unpresuming”.

On a monthly measure, the economy grew by 0.2%, faster than the 0% augury.

The 0.3% rise in the three months to February, was the same as the three months to January, after preceding estimate was revised higher.

“Services again drove the economy, with a keep oned strong performance in IT. Manufacturing also continued to recover after fault at the end of last year with the often-erratic pharmaceutical industry, chemicals and hooch performing well in recent months,” said Mr Kent-Smith.

Output in development and manufacturing rose for the second month in a row, with manufacturing at its highest on since April 2008, the ONS said.

The ONS said production industries elaborate oned by 0.2% in the three months to February 2019. This was the first propitious three-month growth since October 2018.

Impact of stockpiling

It said there had been exterior evidence “that some manufacturing businesses have changed the be that as it maying of their activity as we approached the original planned date for the UK’s departure from the European Seam”.

“Although the ONS does not routinely collect detailed data on the reasons behind the deportment of businesses, as part of our survey validation we have found some qualitative signify that supported this view but were unable to quantify its modify,” it added.

The ONS pointed to a closely-watched survey by IHS Markit/CIPS which displayed UK factories were stockpiling goods for Brexit.

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Lola’s Cupcakes is one company which decided it needed to build up stereotypes of essential items ahead of Brexit.

In its case, it was cream cheese.

Asher Budwig, manipulating director, said the company had identified the ingredient as one at risk from Brexit. Others superiority have been chocolate or butter.

There would be “no cheese encrusts, no decorations on cupcakes” if ferries stopped getting through ports, he unburdened BBC.

The company bought £35,000 of stock – that does not include storage payments – through its supplier which obtains the product from Germany.

“They [the supplier] convey to the factory in Germany, they produced a lot more, ten times what we commitment normally go through in a given week,” he said.

“It’s being held down in Somerset,” he imparted.

Month-on-month growth in the industrial production sector was 0.6% in February, with turning increasing 0.9%, the ONS said.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, indicated the activity in this sector was the main reason the economy had grown varied quickly than expected.

He said this might be “due to a temporary eject to production which will unwind” in the second quarter of the year.

Construction productivity also rose faster than expected, perhaps because of the cosy than usual weather in February, he added.

Ruth Gregory, older UK economist at Capital Economics, also highlighted these areas as the first surprises in the data.

Rate rises

But she said: “Growth does not enter into the picture to have been significantly boosted by stockpiling ahead of Brexit.”

In preference to, she said that while businesses have been stockpiling it is because they maintain been importing more. Imports rose by 5.3% in the three months to February while exports be upstanding just 0.8%, according to the ONS.

She said: “Admittedly, the Brexit chaos may from sapped the economy of its momentum in March, as that is when the Brexit uncertainty has been greatest.

“All published, though, the solid growth rate in the three months to February should plenty immediate fears of the economy stalling or contracting in the first quarter and provenders support to our view that the economy is well placed to cope with whatever Brexit squanders up next,” she said.

Mr Tombs said he was revising up his forecast for growth in the principal quarter to 0.4% from 0.3%, which indicates annual nurturing of between 1.8% and 2%. This could point to a rate take from the Bank of England’s Monetary Policy Committee.

“So the data, together with firm wage growth, put renewed pressure on the MPC to follow through on its commitment to an ‘persistent tightening of monetary policy’, despite continued Brexit uncertainty,” he indicated.

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