Recession fears ‘banished’ despite weak August figures

Fears of a recession ahead of Brexit have been “banished” after the economy grew by 0.3% in the three months to August, according to data released by the Office for National Statistics (ONS).

For an economy to meet the traditional definition of a recession, it must contract for two consecutive quarters – something the ONS now says is unlikely to happen.

It would require the economy to shrink by an unusually large 1.5% in September.

According to Andrew Wishart, an economist at Capital Economics, this essentially means that fears of a recession have “been banished” for the time being.

It comes despite the UK economy contracting by 0.1% in August, its first monthly drop since April.

This followed a stronger than expected June and July, with both months narrowly beating out estimates.

Overall, the UK’s GDP in the three months to August was 0.3% higher than in the previous three-month period.

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The manufacturing sector performed poorly in August, shrinking by 0.7%. The sector also suffered a 0.3% drop in June.

August, on the whole, was a poor month for the UK economy. Across the board, the economy either shrank, or grew only marginally.

Production was down by 0.6%, while agricultural output contracted by 0.2%. Construction grew by just 0.2%.

Josh Hardie CBI
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The data for August suggests “there is very little to cheer about in the UK economy at the moment,” according to ING economist James Smith.

One bright spot for the economy was the UK’s film and TV industry, which contributed heavily to the growth of the services sector over the past three months, according to the ONS.

“The big picture, though, is that the risk of a no-deal Brexit every few months is weighing on both investment and consumer spending,” Mr Wishart said.

In comments made at the unveiling of the UK’s new £20 note on Thursday, Mark Carney said that the GDP data was “fairly volatile at the moment”, and “influenced by a number of Brexit related effects.”

“If you cast your mind back to our August report we expected 0.2% for Q3. We have one month to go. The underlying pace of growth is a bit softer than that,” he added.

The pound was up 0.15% against the dollar following the stronger-than-expected output data for August.

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