U.K. Avoids Recession But Remains Hobbled Ahead of Election
The economy grew 0.3% between July and September.
(Bloomberg) --
Britain dodged a recession ahead of the now-postponed Oct. 31 Brexit deadline, but the figures underscored the economic challenge facing whoever wins next month’s election.
The latest GDP figures give parties across the political spectrum something to latch on to in the campaign for next month’s election.
Consumer spending was strong, and the economy recorded 0.3% quarterly growth, but that was below expectations, and year-on-year figures were the weakest in almost a decade.
Prime Minister Boris Johnson’s Conservatives are trying to focus the campaign on the economy, something that polls show voters regard as its strong suit. This weekend, the Tories upped their attacks on that topic, invoking Labour’s fiscal program before the financial crisis a decade ago and claiming its latest policies would further undermine growth.
After a decade of austerity, both Johnson and Labour leader Jeremy Corbyn have unveiled massive spending plans in a bid to woo voters. For Johnson, the goal is a Conservative majority in the Dec. 12 vote to allow him to push his Brexit deal through Parliament.
A breakdown of the latest data revealed a familiar pattern, with solid consumer and government spending offsetting weak business investment. Services and construction expanded, while manufacturing flat-lined, with only a rebound in car production preventing the sector from declining.
Exports jumped in the quarter, leading to a sharp narrowing of the trade deficit. Net trade added 1.2 points to growth. However, the data have been volatile recently because of effect of stockpiling and flows of non-monetary gold.
There was little evidence of Brexit hoarding, with inventories actually falling, in contrast to the huge surge ahead of the initial March 29 deadline to leave the EU.
The quarterly GDP increase was due entirely to a strong July, with output falling 0.2% in August and 0.1% in September. Overall GDP rose just 1% in the third quarter from a year earlier, the least since 2010.
To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Andrew Atkinson, Brian Swint
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