Britain’s Brexit-bound economy is showing little sign that its leaden performance in the first half of 2017 is improving, despite hints of better times for manufacturers.
In July, factory output increased at the fastest pace this year, but this was set against a sharp decline in the construction industry and another lacklustre month for trade.
The world’s fifth-biggest economy continued to lag the strong recovery in the eurozone and is now growing slowly in the third quarter, after suffering its slowest first-half of the year since 2012.
Separately, the British Chambers of Commerce said the economy was “treading water” ahead of Brexit, adding that sterling’s sharp fall, since last year’s vote to leave the EU, had done more harm than good.
That muted assessment was backed up by the official data, which showed little help for exporters from sterling’s weakness. “The economy is clearly underperforming, compared to what is going on globally and regionally, but weakness in growth does not appear to be intensifying,” JPMorgan economist, Malcolm Barr, said.
The Office for National Statistics said manufacturing output rose 0.5% in July, above economists’ forecasts in a Reuters poll, after car production reversed a dip in the previous month. But growth in the broader measure of industrial output slowed to 0.2%, in line with forecasts, as a lack of summer maintenance of North Sea oil fields boosted production more than usual for the time of year.
Business surveys, over the last week, suggested manufacturers look set for a stronger end to the year, boosted by exports — especially to the EU. Still, official data have yet to reflect this.
The ONS said Britain’s trade deficit in goods edged up to £11.57bn (€12.63bn) in July, the biggest since March. Goods exports to the EU increased, but this was offset by a fall in exports to the rest of the world.
However, the National Institute of Economic and Social Research (NIESR) said the UK economy has picked up momentum. “If, indeed, economic growth is sustained at the 0.4% to 0.5% level, we prescribe a 25 basis-point increase in bank rate in the first quarter of 2018 to reverse some of the emergency stimulus that the Bank of England injected into the economy last August, in response to the EU referendum result,” it said.
Meanwhile, Britain and the EU need an agreement to allow cross-border financial contracts to run beyond Brexit and avoid disrupting markets, two banking lobby groups said.
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