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| UK economic growth: what the economists say | UK economic growth: what the economists say |
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| Britain’s economy was stronger than initially thought in the run-up to the EU referendum, growing by 0.7% in the second quarter, according to the Office for National Statistics. | |
| Separate figures from the ONS suggested the economy got off to a decent start in the third quarter, with the services sector growing by 0.4% in July, a month after the Brexit vote. Services account for almost 80% of the UK economy. | |
| The ONS said there was no sign that Britain’s decision to leave the EU triggered an immediate shock to the economy, but it was waiting for the full picture to emerge. | |
| Economists largely agree that while Britain will almost certainly avoid a recession this year, the economy is likely to slow in 2017 as businesses and consumers grapple with heightened uncertainty. | Economists largely agree that while Britain will almost certainly avoid a recession this year, the economy is likely to slow in 2017 as businesses and consumers grapple with heightened uncertainty. |
| Here is a roundup of economists’ reaction to the latest figures. | |
| Martin Beck, senior economic adviser to forecasters EY Item Club | Martin Beck, senior economic adviser to forecasters EY Item Club |
| “Consumers did most of the heavy lifting that supported the upward revision of GDP in the second quarter. More importantly, the services sector showed a 0.4% increase in output in July, a very strong out-turn which should end any fears that GDP will contract in the third quarter. | |
| “Our short-term model suggests that we are now on track to see GDP growth in the region of 0.2-0.3% in the third quarter. The economy looks to be in much better shape than many had feared it would be as we move towards the fourth quarter. The latest data supports our above-consensus view that the economy will grow by 1.9% this year. And with activity carrying more momentum than anticipated, there is the chance of an upside surprise for 2017.” | “Our short-term model suggests that we are now on track to see GDP growth in the region of 0.2-0.3% in the third quarter. The economy looks to be in much better shape than many had feared it would be as we move towards the fourth quarter. The latest data supports our above-consensus view that the economy will grow by 1.9% this year. And with activity carrying more momentum than anticipated, there is the chance of an upside surprise for 2017.” |
| John Hawksworth, chief economist at accountancy firm PricewaterhouseCooper | John Hawksworth, chief economist at accountancy firm PricewaterhouseCooper |
| “Today’s data confirmed the generally favourable picture of how the UK economy evolved immediately before and after the Brexit vote. | “Today’s data confirmed the generally favourable picture of how the UK economy evolved immediately before and after the Brexit vote. |
| “We do still expect some moderation in GDP growth later this year and in 2017 as increased uncertainty acts as a drag on business investment, but there are no signs yet of the Brexit vote pushing the UK into recession.” | “We do still expect some moderation in GDP growth later this year and in 2017 as increased uncertainty acts as a drag on business investment, but there are no signs yet of the Brexit vote pushing the UK into recession.” |
| Scott Corfe, director at the Centre for Economics and Business Research | Scott Corfe, director at the Centre for Economics and Business Research |
| “There is very little evidence of a slowdown in the UK economy either prior to or immediately after the Brexit referendum. A recession will almost certainly be avoided this year. | “There is very little evidence of a slowdown in the UK economy either prior to or immediately after the Brexit referendum. A recession will almost certainly be avoided this year. |
| “Having said that, 2017 is set to be a challenging year in Cebr’s view, with economic growth expected to slow from about 2% this year to close to 0.5%. Economic growth has been partly driven by UK consumers becoming less cautious and saving less. This could easily unravel in the face of headwinds that cause consumers to adopt a more cautious attitude – such as the significant degree of economic uncertainty that is likely to be seen over the coming years, both Brexit-related and otherwise.” | “Having said that, 2017 is set to be a challenging year in Cebr’s view, with economic growth expected to slow from about 2% this year to close to 0.5%. Economic growth has been partly driven by UK consumers becoming less cautious and saving less. This could easily unravel in the face of headwinds that cause consumers to adopt a more cautious attitude – such as the significant degree of economic uncertainty that is likely to be seen over the coming years, both Brexit-related and otherwise.” |
| Samuel Tombs, chief UK economist at Pantheon Macroeconomics | Samuel Tombs, chief UK economist at Pantheon Macroeconomics |
| “The jump in services output in July is the clearest sign yet that the Brexit vote has not pushed the economy into a recession. Since the Bank of England’s monetary policy committee expected GDP growth to slow to 0.2% in the third quarter, considerable doubt is now cast over whether the MPC will cut interest rates again in November. | “The jump in services output in July is the clearest sign yet that the Brexit vote has not pushed the economy into a recession. Since the Bank of England’s monetary policy committee expected GDP growth to slow to 0.2% in the third quarter, considerable doubt is now cast over whether the MPC will cut interest rates again in November. |
| “A strong case remains, however, for expecting the economic recovery to slow ahead. Surveys show clearly that businesses are holding back from investment, while households will soon be hit by a rebound in inflation due to sterling’s depreciation.” | “A strong case remains, however, for expecting the economic recovery to slow ahead. Surveys show clearly that businesses are holding back from investment, while households will soon be hit by a rebound in inflation due to sterling’s depreciation.” |
| Howard Archer, chief UK and European economist at IHS Global Insight | Howard Archer, chief UK and European economist at IHS Global Insight |
| “News that services output grew 0.4% month-on-month in July in the immediate aftermath of the Brexit vote is a significant boost to third quarter growth prospects; consequently we are lifting our third quarter growth estimate to 0.4% quarter-on-quarter from 0.3%. | “News that services output grew 0.4% month-on-month in July in the immediate aftermath of the Brexit vote is a significant boost to third quarter growth prospects; consequently we are lifting our third quarter growth estimate to 0.4% quarter-on-quarter from 0.3%. |
| “Nevertheless, we expect the economy will find growth increasingly difficult over the coming months, particularly in 2017, although it will most likely dodge recession. We expect the economy to suffer as the uncertainties facing businesses and consumers are magnified by the triggering of Article 50. Additionally, the fundamentals for consumers will likely increasingly weaken as their purchasing power is diluted by rising inflation and muted earnings growth. Furthermore, the labour market looks likely to soften in 2017.” | “Nevertheless, we expect the economy will find growth increasingly difficult over the coming months, particularly in 2017, although it will most likely dodge recession. We expect the economy to suffer as the uncertainties facing businesses and consumers are magnified by the triggering of Article 50. Additionally, the fundamentals for consumers will likely increasingly weaken as their purchasing power is diluted by rising inflation and muted earnings growth. Furthermore, the labour market looks likely to soften in 2017.” |
| Paul Hollingsworth, UK economist at Capital Economics | Paul Hollingsworth, UK economist at Capital Economics |
| “Although the incoming economic data has suggested that the immediate economic impact of Brexit has not been as severe as some had expected, growth still looks to have slowed markedly in the third quarter. Survey measures point to quarterly growth of only a bit above zero. | “Although the incoming economic data has suggested that the immediate economic impact of Brexit has not been as severe as some had expected, growth still looks to have slowed markedly in the third quarter. Survey measures point to quarterly growth of only a bit above zero. |
| “Nonetheless, with another cut in interest rates likely when the Bank of England’s monetary policy committee meets again on 3 November, and some easing in the fiscal squeeze set to be announced later that month in the autumn statement, we don’t think that the economy is headed into a more pronounced downturn. We maintain our view that GDP will expand by a subdued, but above-consensus 1.5% in 2017.” | “Nonetheless, with another cut in interest rates likely when the Bank of England’s monetary policy committee meets again on 3 November, and some easing in the fiscal squeeze set to be announced later that month in the autumn statement, we don’t think that the economy is headed into a more pronounced downturn. We maintain our view that GDP will expand by a subdued, but above-consensus 1.5% in 2017.” |
| Alan Clarke, economist at Scotiabank | Alan Clarke, economist at Scotiabank |
| “The more interesting release was the monthly services output data for July. Representing around three quarters of the economy, this was the first official output data for the sector to cover the post Brexit vote period. | “The more interesting release was the monthly services output data for July. Representing around three quarters of the economy, this was the first official output data for the sector to cover the post Brexit vote period. |
| “Services grew by 0.4% month-on-month, well above consensus, with the prior month also revised up for good measure. So despite the Brexit vote and the anxiety surrounding it, it was business as usual in the services sector.” | “Services grew by 0.4% month-on-month, well above consensus, with the prior month also revised up for good measure. So despite the Brexit vote and the anxiety surrounding it, it was business as usual in the services sector.” |