Thursday, October 27, 2016

Growth down slighly, but above expectations, in the three months after the Brexit vote.

Good news for all sides of the argument in the latest ONS figures for UK economic growth.

For sensible people who are more interested in the success of the UK than scoring political points, it is good news that the economy expanded by 0.5% in the July-to-September period, according to the Office for National Statistics.

As chancellor Philip Hammond observed,

"The fundamentals of the UK economy are strong and today's data show that the economy is resilient."

The Office for National Statistics says that "the pattern of growth continues to be broadly unaffected following the EU referendum".

Good news also, however, unfortunately, for headbangers on both sides of the Brexit debate for whom the facts are only important insofar as they can be twisted to show that their own side was right all along and everything the other side said during the referendum campaign was rubbish.

For the Remainers, economic grown has dropped from 0.7% in the three months prior to the Brexit vote to 0.5% in the three months after it, and the pattern of growth was a rather unbalanced one: the one sector of the economy which delivered that growth was the service sector, which was up by 0.8%, while agriculture, manufacturing production and construction all shrank.

They were also quick to argue that they had warned about potential damage over a period of several years, that only prompt action by the Bank of England saved deeper damage to the economy and that worse is to come.

For the Brexiteers, the good news is that the drop in growth was nothing like as much as feared and consequently growth over the last month was significantly better than had been predicted (0.5% instead of 0.3%)

The truth is that it is way too early to say what the long-term effects of Brexit on the economy will be - the UK has not left the EU yet and the terms on which we do will be very significant.

The one thing we can say is that the British economy is indeed, as the chancellor says, resilient and most aspects of the economy are still doing reasonably well. That might change in either direction.

As mentioned above, the economy was boosted by a particularly strong performance from the services sector, which grew by 0.8% in the quarter. Transport, storage and communication was the strongest part of the service sector, growing by 2.2%. That was the fastest pace since 2009 and was helped by a healthy quarter for the UK's film industry. The latest films in the Jason Bourne and Star Trek franchises were released in July along with other popular productions, lifting takings at box offices.

While growth in the services sector was robust, the construction sector contracted by 1.4% and industrial production fell 0.4%, with manufacturing output down 1%.

"In manufacturing, the contraction in output should be attributed to some unwinding of the massive growth spike seen in the second quarter, rather than industry scaling back production for any referendum related reasons," said Lee Hopley, chief economist at the EEF, the manufacturers' organisation.

"In line with the raft of survey data the GDP estimates confirm that it has been more or less business as usual but it doesn't tell us, however, if this will continue for the foreseeable future."

Quite.

More details here.

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