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| Brexit recession fears ease as UK returns to growth in July - business live | |
| (32 minutes later) | |
| The broad picture is that Britain’s economy has weakened this year, warns Rob Kent-Smith, head of GDP at the ONS. | |
| He points out that factories and builders both suffered falling output in the last three months, which is why there was no growth in May-July. | |
| Kent-Smith says: | |
| “GDP growth was flat in the latest three months, with falls in construction and manufacturing. | |
| “While the largest part of the economy, services sector, returned to growth in the month of July, the underlying picture shows services growth weakening through 2019. | |
| The trade deficit narrowed due to falling imports, particularly unspecified goods (including non-monetary gold), chemicals and road vehicles in the three months to July.” | |
| Let’s dig into the detail of the GDP report. | |
| According to the ONS, Britain’s services sector grew by 0.3% in July, providing the bulk of the growth. | |
| But manufacturing also expanded by 0.3%, helping the wider industrial sector to grow by 0.1% during the month. | |
| The Office for National Statistics says UK GDP remains “weak”, with no growth in the last three months (despite the recovery in July). | |
| Newsflash: The UK economy grew by 0.3% in July. | |
| That’s stronger than the 0.1% expected, and could dampen fears of a Brexit recession this autumn. | |
| Over the last three months (May-July), GDP was unchanged. That’s a weak reading, but stronger than the -0.2% recorded in April-June. | |
| More to follow! | |
| Despite worries about the global economy, investors are pushing stock markets higher this morning. | Despite worries about the global economy, investors are pushing stock markets higher this morning. |
| Beijing can take the credit. Over the weekend, China’s central bank launched a new stimulus package of cheap loans, to protect its companies from the latest US tariffs. | Beijing can take the credit. Over the weekend, China’s central bank launched a new stimulus package of cheap loans, to protect its companies from the latest US tariffs. |
| This lifted the Shanghai exchange by 0.8%, and pushed Japan up by almost 1%. | This lifted the Shanghai exchange by 0.8%, and pushed Japan up by almost 1%. |
| European markets have also benefited, hitting a five-week high in early trading. | European markets have also benefited, hitting a five-week high in early trading. |
| The UK isn’t alone in suffering weak growth. | The UK isn’t alone in suffering weak growth. |
| The eurozone only expanded by 0.2% in April-June, Germany may be falling into recession, and the US-China trade war is causing turbulence worldwide. | The eurozone only expanded by 0.2% in April-June, Germany may be falling into recession, and the US-China trade war is causing turbulence worldwide. |
| This chart from economist Rupert Seggins shows how the UK has fallen towards the bottom of the global growth league over the last year, but certainly isn’t the worst economy out there: | This chart from economist Rupert Seggins shows how the UK has fallen towards the bottom of the global growth league over the last year, but certainly isn’t the worst economy out there: |
| 31 out of 36 OECD countries have reported GDP figures for Q2 2019. Hungary top of the table (5.2%y/y) with Turkey at the bottom (-1.4%y/y). US top of the G7 (2.3%y/y) with Germany (0.4%y/y) & Italy (-0.1%y/y) at the bottom. UK's 1.2%y/y puts just behind France (1.4%y/y). pic.twitter.com/dJMydilgyU | 31 out of 36 OECD countries have reported GDP figures for Q2 2019. Hungary top of the table (5.2%y/y) with Turkey at the bottom (-1.4%y/y). US top of the G7 (2.3%y/y) with Germany (0.4%y/y) & Italy (-0.1%y/y) at the bottom. UK's 1.2%y/y puts just behind France (1.4%y/y). pic.twitter.com/dJMydilgyU |
| This chart from Bloomberg shows how UK growth has been choppy recently, vanishing altogether in the second quarter of 2019. | This chart from Bloomberg shows how UK growth has been choppy recently, vanishing altogether in the second quarter of 2019. |
| Deutsche Bank’s Sanjay Raja hopes that the service sector will keep Britain out of recession this summer, telling clients: | Deutsche Bank’s Sanjay Raja hopes that the service sector will keep Britain out of recession this summer, telling clients: |
| Outside of another momentous week in politics, next week’s data docket will be very important for the economy. On Monday, we will get a first glimpse of Q3 activity with the July monthly GDP reading out in the morning. | Outside of another momentous week in politics, next week’s data docket will be very important for the economy. On Monday, we will get a first glimpse of Q3 activity with the July monthly GDP reading out in the morning. |
| If survey indicators are anything to go on, we should continue to see widespread weakness across the economy, with manufacturing, construction and services sectors all dropping. However, we don’t expect the economy to shrink in July. Instead, we see a modest bump in activity (0.1% m-o-m), driven in large part by the services sector. With retail spending and government consumption up in July, we think this will be enough to prop up the economy. | If survey indicators are anything to go on, we should continue to see widespread weakness across the economy, with manufacturing, construction and services sectors all dropping. However, we don’t expect the economy to shrink in July. Instead, we see a modest bump in activity (0.1% m-o-m), driven in large part by the services sector. With retail spending and government consumption up in July, we think this will be enough to prop up the economy. |
| Here’s some grim news - Northern Ireland’s private sector economy may have already plunged into recession. | Here’s some grim news - Northern Ireland’s private sector economy may have already plunged into recession. |
| A new survey of companies across Northern Ireland has found that output and new business fell sharply in August, forcing companies to cut staff as business confidence hit a new low. | A new survey of companies across Northern Ireland has found that output and new business fell sharply in August, forcing companies to cut staff as business confidence hit a new low. |
| Services sector firms, manufacturers, construction companies and farmers all reported that conditions worsened last month. | Services sector firms, manufacturers, construction companies and farmers all reported that conditions worsened last month. |
| This pulled the Ulster Bank Northern Ireland PMI down to 45.4 in August, a little higher than in July. This is the sixth month in a row that it has fallen below the 50-point mark that separates growth from contraction. | This pulled the Ulster Bank Northern Ireland PMI down to 45.4 in August, a little higher than in July. This is the sixth month in a row that it has fallen below the 50-point mark that separates growth from contraction. |
| It’s also much weaker than the UK average of 49.7, and shows that Brexit is hurting the Northern Ireland economy. The report’s online here. | It’s also much weaker than the UK average of 49.7, and shows that Brexit is hurting the Northern Ireland economy. The report’s online here. |
| Richard Ramsey, chief economist for Northern Ireland at Ulster Bank, said Northern Ireland is the weakest-performing sector of the UK economy. | Richard Ramsey, chief economist for Northern Ireland at Ulster Bank, said Northern Ireland is the weakest-performing sector of the UK economy. |
| “The latest PMI provides further evidence that Northern Ireland’s private sector has entered, or is entering, recession. | “The latest PMI provides further evidence that Northern Ireland’s private sector has entered, or is entering, recession. |
| Output has fallen for the sixth month in a row and exports have declined for the seventh month. Add to this an eighth successive month of falling employment and it is hard to avoid this conclusion. | Output has fallen for the sixth month in a row and exports have declined for the seventh month. Add to this an eighth successive month of falling employment and it is hard to avoid this conclusion. |
| “All four sectors monitored by the PMI are in decline for the fourth month running according to the latest survey. Perhaps the most concerning elements of August’s report are the pace of deterioration in business conditions within the construction and manufacturing sectors. | “All four sectors monitored by the PMI are in decline for the fourth month running according to the latest survey. Perhaps the most concerning elements of August’s report are the pace of deterioration in business conditions within the construction and manufacturing sectors. |
| Construction orders plunged to an 81-month low and have now been falling consistently for 12 months. | Construction orders plunged to an 81-month low and have now been falling consistently for 12 months. |
| Within manufacturing, both output and orders continue to fall markedly, and significantly this is now impacting on staffing levels. Manufacturers posted their fastest rate of job losses in over seven years during August. | Within manufacturing, both output and orders continue to fall markedly, and significantly this is now impacting on staffing levels. Manufacturers posted their fastest rate of job losses in over seven years during August. |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| GDP measures “things you can drop” on your foot, as the old joke puts it. It’s an imperfect measure of how a country is really performing, as it ignores our well-being and cannot distinguish good economic growth from bad. | GDP measures “things you can drop” on your foot, as the old joke puts it. It’s an imperfect measure of how a country is really performing, as it ignores our well-being and cannot distinguish good economic growth from bad. |
| But, it’s still our best guide to the monthly fluctuations in the economy. And today we’ll learn whether Britain’s economy has moved another step closer to recession over the summer. | But, it’s still our best guide to the monthly fluctuations in the economy. And today we’ll learn whether Britain’s economy has moved another step closer to recession over the summer. |
| The UK July GDP report, due at 9.30am, is expected to show that Britain’s economy contracted slightly in the May-July period. But in July alone, it may have expanded by 0.1%, perhaps helped by another burst of Brexit stockpiling. | The UK July GDP report, due at 9.30am, is expected to show that Britain’s economy contracted slightly in the May-July period. But in July alone, it may have expanded by 0.1%, perhaps helped by another burst of Brexit stockpiling. |
| A month ago we learned that the UK shrank by 0.2% in April-June, putting us halfway into an official recession (two consecutive quarters of negative growth). | A month ago we learned that the UK shrank by 0.2% in April-June, putting us halfway into an official recession (two consecutive quarters of negative growth). |
| Today’s report will show if the situation deteriorated in the third quarter of 2019. It will include new manufacturing data, which may show British industry stagnated during July. | Today’s report will show if the situation deteriorated in the third quarter of 2019. It will include new manufacturing data, which may show British industry stagnated during July. |
| With business confidence weak, manufacturing output down and builders struggling, the economic picture is worrying - and depressingly reliant on consumer spending to keep the wheels moving. | With business confidence weak, manufacturing output down and builders struggling, the economic picture is worrying - and depressingly reliant on consumer spending to keep the wheels moving. |
| The twists and turns in the Brexit saga continue to weigh the economy down.Overnight, accountancy giant KPMG warned that a no-deal Brexit would drive Britain into its first recession since the financial crisis. | The twists and turns in the Brexit saga continue to weigh the economy down.Overnight, accountancy giant KPMG warned that a no-deal Brexit would drive Britain into its first recession since the financial crisis. |
| KPMG predicts no-deal Brexit recession in 2020 | KPMG predicts no-deal Brexit recession in 2020 |
| These clouds of economic and political uncertainty are making it harder to tell what’s really going on in the UK economy. The US-China trade war, and the slowdown in the eurozone, are also hurting growth. | These clouds of economic and political uncertainty are making it harder to tell what’s really going on in the UK economy. The US-China trade war, and the slowdown in the eurozone, are also hurting growth. |
| Daria Parkhomenko of RBC Capital Markets says forecasting UK growth is “fraught with uncertainties at present.” | Daria Parkhomenko of RBC Capital Markets says forecasting UK growth is “fraught with uncertainties at present.” |
| Our economists note that the Q1 outturn of 0.5% q/q was boosted by stockpiling by firms ahead of the end-of-March original Brexit date. The unwind of those efforts plus car plant shutdowns in April then dragged Q2 growth lower to -0.2% q/q. | Our economists note that the Q1 outturn of 0.5% q/q was boosted by stockpiling by firms ahead of the end-of-March original Brexit date. The unwind of those efforts plus car plant shutdowns in April then dragged Q2 growth lower to -0.2% q/q. |
| Those Brexit-induced distortions are also likely to affect Q3 GDP; whether stockpiling by firms resumes ahead of the new Brexit deadline of October 31 and how much of April’s ‘lost’ car production will now take place in August will be major influences on Q3 GDP. | Those Brexit-induced distortions are also likely to affect Q3 GDP; whether stockpiling by firms resumes ahead of the new Brexit deadline of October 31 and how much of April’s ‘lost’ car production will now take place in August will be major influences on Q3 GDP. |
| The UK economy has slowed, but timing effects make it difficult to ascertain by how much. | The UK economy has slowed, but timing effects make it difficult to ascertain by how much. |
| Also coming up today | Also coming up today |
| Research group Sentix’s latest eurozone investor confidence report is out today, and likely to be gloomy. | Research group Sentix’s latest eurozone investor confidence report is out today, and likely to be gloomy. |
| Sterling has dipped a little this morning, back to $1.227, as another day of political drama unfolds. Boris Johnson is expected to make a second, failed, attempt to trigger a snap general election today, just as the backbench bill to block no deal is expected to receive royal assent today. | Sterling has dipped a little this morning, back to $1.227, as another day of political drama unfolds. Boris Johnson is expected to make a second, failed, attempt to trigger a snap general election today, just as the backbench bill to block no deal is expected to receive royal assent today. |
| Brexit: critical day for Boris Johnson as no-deal bill awaits royal assent – politics live | Brexit: critical day for Boris Johnson as no-deal bill awaits royal assent – politics live |
| The agenda | The agenda |
| 9.30am BST: UK GDP report for July. Expected to show 0.1% growth in July, but -0.1% over the quarter. | 9.30am BST: UK GDP report for July. Expected to show 0.1% growth in July, but -0.1% over the quarter. |
| 9.30am BST: UK manufacturing and industrial production figures. Both expected to show a 1.0% fall year-on-year, or 0% change month-on-month in July). | 9.30am BST: UK manufacturing and industrial production figures. Both expected to show a 1.0% fall year-on-year, or 0% change month-on-month in July). |
| 9.30am BST: Sentix survey of investor confidence. Expected to drop to -14, from -13.7 in August. | 9.30am BST: Sentix survey of investor confidence. Expected to drop to -14, from -13.7 in August. |