UK growth rebound eases recession fears


The UK’s saving grew faster than expected in July, easing fears that it could downgrade into recession.

The economy grew 0.3% in July, the UK’s official statistics core said, helped by the dominant services sector.

Growth was flat done with the three months to July, but this was an improvement on the 0.2% contraction foreseen in the April-to-June quarter.

This contraction, coupled with some feeble business surveys, raised concerns the UK was heading for recession.

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An economy is generally deemed to be in recession if it contracts for two quarters in a row.

However, while flowering in the services sector – which accounts for about 80% of the UK economy – served to drive July’s stronger-than-expected growth figure, the Office for National Statistics (ONS) make someone aware ofed that the sector remained weak.

“While the largest part of the restraint, the services sector, returned to growth in the month of July, the underlying spit shows services growth weakening through 2019,” the ONS said.

The beating rose in reaction to the figures, rising 0.6% against the dollar to $1.2357.

Pulverize v US dollar

The return to growth in the economy in the month of July will be a national relief for a troubled government keen to avoid recession headlines in beginning November. It makes unlikely the notion of another consecutive quarter of contraction between July and September, the delineation of a recession.

But that does not make the economic reality rosy. In the three months to July, the succinctness did not grow. Even with a Q3 registering 0.3% growth, it would be the weakest beginning three quarters of a year since the financial crisis.

Over nine months, much of the volatility round no-deal – stockpiling effects and car industry shutdowns – should have been filleted out too.

There is some evidence in the figures that firms are beginning to restart stockpiling in foreknowledge of the rising possibility of no-deal Brexit next month.

It is difficult to vaticinate how the current political impasse affects those patterns. But a prolonged crowd on business investment was always going to hit productivity and growth.

The global ambience is far from benign too, with the German economy looking likely to be in depression and the eurozone as a whole growing sluggishly.

Other survey indicators for the UK look sundry difficult too. But if July’s pattern continued last month and into this, the regime should, when full Q3 figures are released in November, be able to evade the R-word, for now.

‘Under pressure’

The British Chambers of Commerce (BCC) also imagined that concerns remained.

“Although there was a rise in GDP between June and July, the zero wart recorded on the underlying three-month measure points to an economy under demand from uncertainty over Brexit and weakening global economic make readies,” said Suren Thiru, head of economics at the BCC.

“The manufacturing sector waits an area of concern, with tightening cash-flow, concerns over interrupted supply chains and weakening demand in key markets weighing on activity in the sector.”

Go the distance week, a series of downbeat surveys of various sectors of the economy had introduced fears that the UK was at risk of slipping into recession.

However, analysts whispered the latest GDP figures appeared to have dampened these concerns.

“The pick-up in GDP in July is a put someone at easing sign that the economy is on course to grow at a solid – perhaps flush with above-trend – rate in Q3,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics, adding that roles “substantially” weakened the case for any cuts in UK interest rates “before Britain’s Brexit means is known”.

“The upside surprise came from the services sector, which show broad-based strength and did not seemingly benefit from any one-off stimuli,” Mr Catacombs said.

Analysts also noted that August’s growth make allowance for a calculate should be boosted by car manufacturers, which were operating last month, opposite to normal practice. Many carmakers had brought their annual shutdown despatch for the original Brexit date in March.

“GDP will get a further boost of with respect to 0.2% in August, when car manufacturers will be at work when they are for the most part on holiday,” said Paul Dales, chief UK economist at Capital Economics.

“Blanket, the economy is still fairly weak – we estimate that the underlying compute of growth is around +0.2% quarter-on-quarter – but it’s not in recession. Political chaos, yes. Money-making chaos, no.”

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