U.K. Economy Set to Avoid Imminent Recession
A no-deal departure from the European Union could plunge the U.K. economy into a recession, say economists.
(Bloomberg) --
The U.K. economy unexpectedly shrank in August as manufacturing slumped but it remains on course to dodge an imminent recession.
Gross domestic product fell 0.1% after a 0.4% increase in July, the Office for National Statistics said Thursday. It left output up 0.3% over the latest three months.
A no-deal departure from the European Union could plunge the economy into a recession, economists say, though Britain looks likely to be spared for now. A second straight quarter of contraction will be avoided unless output plunges by around 1.5% in September, a decline last seen in 2012.
Only the construction sector grew in August. Manufacturing contracted as slowing global growth hit exports and the dominant services industry failed to advance for the first time in four months, indicating mounting jitters as a Brexit transition agreement continues to elude negotiators three weeks before the Oct. 31 deadline.
Stockpiling ahead of the original March 29 Brexit deadline boosted the economy in the first quarter, but there was scant evidence of renewed hoarding in the current quarter with imports little changed over the month.
Key Insights
- Manufacturing fell 0.7% in August, driven by lower pharmaceuticals output. Ten out of 13 manufacturing sectors posted declines. Overall industrial output declined 0.6%
- Vehicle output rose 0.7% after seasonal adjustment but there was no evidence of turnover being higher than normal last month, despite many car makers bringing forward summer shutdowns to April to coincide with the original Brexit deadline, the ONS said.
- Construction rose 0.2%; output was unchanged in the services industry, which makes up four-fifths of the economy. Services drove growth in the latest three months, however, helped by TV and film production
- PMI surveys for September made gloomy reading but the economy probably did enough to return to growth in the third quarter. The National Institute of Economic and Social Research said the latest GDP data point to an expansion of 0.5% in the third quarter and 0.3% in the fourth
- The trade deficit was little changed at 9.8 billion pounds ($12 billion) in August. The value of exports fell 0.5%. Imports gained 0.1% but were flat when unspecified goods including non-monetary gold are excluded
- Monthly GDP figures were revised as a result of the annual Blue Book process
To contact the reporter on this story: Jill Ward in London at jward98@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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