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| UK economic growth: what the economists say UK economic growth: what the economists say | |
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| The UK economy grew a solid 0.6% in the months leading up to the referendum as consumer spending picked up and business investment bounced back, official figures confirmed. | The UK economy grew a solid 0.6% in the months leading up to the referendum as consumer spending picked up and business investment bounced back, official figures confirmed. |
| Statisticians said there was little sign the June referendum on EU membership had affected growth. Economists are warning, however, that the second quarter will turn out to be a high point for this year with growth slowing in the third and fourth quarters as companies react to the decision to leave the EU. | Statisticians said there was little sign the June referendum on EU membership had affected growth. Economists are warning, however, that the second quarter will turn out to be a high point for this year with growth slowing in the third and fourth quarters as companies react to the decision to leave the EU. |
| Here is a round-up of economists’ reactions to what happened in the April to June quarter and what they expect for the months ahead. | Here is a round-up of economists’ reactions to what happened in the April to June quarter and what they expect for the months ahead. |
| Kallum Pickering, senior UK economist at the bank Berenberg | Kallum Pickering, senior UK economist at the bank Berenberg |
| “Remarkably, the cyclical performance of the UK economy improved in the second quarter despite widespread signs in the soft data that economic growth was slowing, weighed down by the uncertainty related to the June 23 Brexit vote.” | “Remarkably, the cyclical performance of the UK economy improved in the second quarter despite widespread signs in the soft data that economic growth was slowing, weighed down by the uncertainty related to the June 23 Brexit vote.” |
| “We expect the UK economy to stagnate in the second half of the year, caused by a slowdown in consumption and a contraction in business investment. That both consumer spending and business investment picked up ahead of the vote may indicate more resilience to Brexit uncertainty than anticipated.” | “We expect the UK economy to stagnate in the second half of the year, caused by a slowdown in consumption and a contraction in business investment. That both consumer spending and business investment picked up ahead of the vote may indicate more resilience to Brexit uncertainty than anticipated.” |
| Martin Beck, senior economic advisor to forecasters EY Item Club | Martin Beck, senior economic advisor to forecasters EY Item Club |
| “Domestically at least, the release presented a picture of a better-balanced expansion in the three months to June.” | “Domestically at least, the release presented a picture of a better-balanced expansion in the three months to June.” |
| “Of course, the second quarter numbers relate almost entirely to the pre-referendum period, so offer even less guidance than normal to the economy’s future performance. An uncertainty-driven slowdown still seems likely. But with a number of recent surveys from the CBI and others showing bouncebacks from post-vote lows, strong official retail sales numbers for July, and the support offered by the package of measure announced by the Bank of England, predictions that the economy will fall into recession look unduly pessimistic.” | “Of course, the second quarter numbers relate almost entirely to the pre-referendum period, so offer even less guidance than normal to the economy’s future performance. An uncertainty-driven slowdown still seems likely. But with a number of recent surveys from the CBI and others showing bouncebacks from post-vote lows, strong official retail sales numbers for July, and the support offered by the package of measure announced by the Bank of England, predictions that the economy will fall into recession look unduly pessimistic.” |
| Nina Skero, senior economist, Centre for Economics and Business Research | Nina Skero, senior economist, Centre for Economics and Business Research |
| “For some time, the UK economy has relied on domestic consumers as the principle source of growth. Encouraged by a robust labour market, rising house prices and low inflation UK households have consistently contributed around 0.5 percentage points to quarterly GDP growth figures for the past couple of years. | “For some time, the UK economy has relied on domestic consumers as the principle source of growth. Encouraged by a robust labour market, rising house prices and low inflation UK households have consistently contributed around 0.5 percentage points to quarterly GDP growth figures for the past couple of years. |
| “However, whether consumers will continue to spend at the same level in 2017 is rather uncertain. A weaker pound will translate into more expensive imports and therefore higher inflation. As many companies either postpone hiring or freeze wages in response to increased uncertainty, the labour market will also cool somewhat. Finally, slower house price growth or even price declines will weigh on consumer confidence.” | “However, whether consumers will continue to spend at the same level in 2017 is rather uncertain. A weaker pound will translate into more expensive imports and therefore higher inflation. As many companies either postpone hiring or freeze wages in response to increased uncertainty, the labour market will also cool somewhat. Finally, slower house price growth or even price declines will weigh on consumer confidence.” |
| Ian Stewart, chief economist at Deloitte | Ian Stewart, chief economist at Deloitte |
| “The UK entered the post-referendum period with good momentum. Household spending accounts for roughly two-thirds of the economy and is growing at the fastest rate in eight years. We see few signs that Brexit has derailed the consumer recovery.” | “The UK entered the post-referendum period with good momentum. Household spending accounts for roughly two-thirds of the economy and is growing at the fastest rate in eight years. We see few signs that Brexit has derailed the consumer recovery.” |
| John Hawksworth, chief economist at PwC | John Hawksworth, chief economist at PwC |
| “We will have to wait until late October for the first official GDP estimates for the third quarter, but today’s data confirms that the UK economy was in reasonable shape going into the referendum vote, while other recent data suggests that the consumer side of the economy held up reasonably well over the summer.” | “We will have to wait until late October for the first official GDP estimates for the third quarter, but today’s data confirms that the UK economy was in reasonable shape going into the referendum vote, while other recent data suggests that the consumer side of the economy held up reasonably well over the summer.” |
| Lee Hopley, chief economist at EEF, the manufacturers’ organisation | Lee Hopley, chief economist at EEF, the manufacturers’ organisation |
| “The UK economy was firing ahead in the lead up to the referendum, but not quite on all cylinders. While household spending remained the major growth driver businesses also didn’t let the referendum get in the way of capital expenditure plans, with business investment returning to growth after a weak start to the year. However, the familiar story of net trade dragging on growth surfaced again. | “The UK economy was firing ahead in the lead up to the referendum, but not quite on all cylinders. While household spending remained the major growth driver businesses also didn’t let the referendum get in the way of capital expenditure plans, with business investment returning to growth after a weak start to the year. However, the familiar story of net trade dragging on growth surfaced again. |
| “This quarterly growth rate is likely to be a high point this year, but sterling’s plunge could see net trade finally coming to the party in the second half counteracting some Brexit-related weakness in business investment.” | “This quarterly growth rate is likely to be a high point this year, but sterling’s plunge could see net trade finally coming to the party in the second half counteracting some Brexit-related weakness in business investment.” |
| Howard Archer, chief European & UK economist at IHS Markit | Howard Archer, chief European & UK economist at IHS Markit |
| “It is likely to be some considerable time before the economy again expands anything like 0.6% quarter-on-quarter. We suspect that the UK’s vote to leave the European Union in the 23 June referendum will significantly weigh down on UK economic activity for a prolonged period, primarily due to prolonged uncertainty over the outlook affecting business investment and employment. We also suspect that consumer fundamentals will progressively decline... On the positive side, the sharply weakened pound should boost exports.” | “It is likely to be some considerable time before the economy again expands anything like 0.6% quarter-on-quarter. We suspect that the UK’s vote to leave the European Union in the 23 June referendum will significantly weigh down on UK economic activity for a prolonged period, primarily due to prolonged uncertainty over the outlook affecting business investment and employment. We also suspect that consumer fundamentals will progressively decline... On the positive side, the sharply weakened pound should boost exports.” |
| “We now believe that resilient consumer spending will keep the economy growing in the third quarter... Nevertheless, we still believe there is a very real risk that the economy will stagnate in the fourth quarter of 2016 and could even contract marginally early on in 2017.” | “We now believe that resilient consumer spending will keep the economy growing in the third quarter... Nevertheless, we still believe there is a very real risk that the economy will stagnate in the fourth quarter of 2016 and could even contract marginally early on in 2017.” |
| Scott Bowman, UK economist at Capital Economics | Scott Bowman, UK economist at Capital Economics |
| “Looking ahead, growth looks set to slow significantly in the second half of the year as uncertainty related to the Brexit vote takes its toll. The monthly output indices showed that activity fell in May and rose only slightly in June, with almost all of the second quarter’s growth coming in April. Admittedly, consumer spending appears to have held up well since the referendum. But survey measures of business activity have taken large hits and a significant portion of firms say they will invest less as a result of the Brexit vote. | “Looking ahead, growth looks set to slow significantly in the second half of the year as uncertainty related to the Brexit vote takes its toll. The monthly output indices showed that activity fell in May and rose only slightly in June, with almost all of the second quarter’s growth coming in April. Admittedly, consumer spending appears to have held up well since the referendum. But survey measures of business activity have taken large hits and a significant portion of firms say they will invest less as a result of the Brexit vote. |
| “Accordingly, we think that growth will fall to around zero in the third quarter and fourth quarter, as uncertainty about future trading relationships hits investment.” | “Accordingly, we think that growth will fall to around zero in the third quarter and fourth quarter, as uncertainty about future trading relationships hits investment.” |
| Nancy Curtin, chief investment officer of Close Brothers Asset Management | Nancy Curtin, chief investment officer of Close Brothers Asset Management |
| “Better than expected July retail and jobs data suggests that the “Brexit” bogeyman isn’t quite as scary as once thought, with consumer spending robust, and lower sterling supporting exports and industrial production. But, it’s by no means a completely positive picture. Services PMIs provide less encouraging reading, suggesting a more mixed economic outlook. | “Better than expected July retail and jobs data suggests that the “Brexit” bogeyman isn’t quite as scary as once thought, with consumer spending robust, and lower sterling supporting exports and industrial production. But, it’s by no means a completely positive picture. Services PMIs provide less encouraging reading, suggesting a more mixed economic outlook. |
| “The UK economy is in the midst of a period of known ‘unknowns’ and it is too early to make a judgement on the likely health of the UK domestic economy over the coming years – let alone post-Brexit. In the meantime, monetary stimulus and a weaker currency will support growth. If we see the government propose a new policy of fiscal stimulus in the autumn, it will be a key buffer against Brexit-related fallout.” | “The UK economy is in the midst of a period of known ‘unknowns’ and it is too early to make a judgement on the likely health of the UK domestic economy over the coming years – let alone post-Brexit. In the meantime, monetary stimulus and a weaker currency will support growth. If we see the government propose a new policy of fiscal stimulus in the autumn, it will be a key buffer against Brexit-related fallout.” |