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UK economy grows faster than expected

The UK economy grew by 0.3 per cent in the three months to the end of February, a faster than expected rate.

Economists had expected growth of 0.2 per cent for the quarter, and zero per cent for February, instead the economy grew by 0.2 per cent in February.

Samuel Tombs, economist at Pantheon Macroeconomics, said the reason economists were too pessimistic is that data from the purchasing managers index (PMI) was very negative in February, but such indicators tend to be overly pessimistic at times of political uncertainty.

The Office for National Statistics (ONS), which compiled the figures, stated an element of the economic growth came from stockpiling, particularly in the construction industry, ahead of the UK’s expected exit from the EU.

Ulas Akincilar, head of trading at Infinox, noted that UK economic growth continues to be driven by the performance of the services sector of the economy, with the manufacturing and construction sectors continuing to perform poorly.

Yael Selfin, chief economist at KPMG, said the pace of economic growth slowed between January, when it was 0.5 per cent, and February, when it was 0.2 per cent, and such erratic economic performance does not bode well for the performance of the economy in the future.

Ms Selfin added that a prolonged delay to the Brexit process is likely to damage the potential growth rate of the economy for years to come.

By David Thorpe

Source: FT Adviser

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Scotland has second-highest growth in UK, analysis suggests

Scotland’s economy grew by 1.7% in 2018, according to academic estimates, compared with the UK average of 1.4%.

Scotland’s economic growth in 2018 was the second-highest of any UK region, with only London growing more, according to academic estimates.

Although the UK’s economy grew by just 1.4% in 2018 – its lowest rate in six years – Scotland’s economic growth of 1.7% meant it bucked the national tend, new estimates show.

Regional estimates, by academics at the Economic Statistics Centre of Excellence, suggest Scottish growth was up from 1.6% on 2017, while average UK growth fell from 1.8% in the previous year.

SNP MSP Gordon Macdonald welcomed the figures and said: “This analysis shows that the fundamentals of the Scottish economy are strong.

With economic growth rising in Scotland and falling elsewhere across the UK, Tory claims that Scotland is somehow uncompetitive have been thoroughly debunked

Gordon Macdonald MSP

“With economic growth rising in Scotland and falling elsewhere across the UK, Tory claims that Scotland is somehow uncompetitive have been thoroughly debunked.

“But Brexit continues to be an enormous threat to jobs and businesses across Scotland – and the public will be concerned at the complete lack of clarity this close to leaving the EU.

“The SNP in government are offering stability and certainty through our budget which supports jobs and businesses.

“The UK Government must do the same by ruling out a no-deal Brexit that would be economically disastrous.”

London continues to far outperform the rest of the UK, with estimated growth of 2.9% in 2018.

In addition to Scotland, the North West, South West and East Midlands saw growth estimates for 2018 slightly higher than the UK as a whole.

Substantially behind the UK average were Wales, Northern Ireland and the East of England.

Source: Express and Star

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Brexit worries slow UK growth to near standstill

Britain’s economic growth slowed to a crawl at the end of 2018 and the housing market is stalling, according to data published on Friday, less than three months before Brexit.

A closely watched business survey indicated firms were growing more anxious, while figures from the Bank of England and mortgage lender Nationwide painted a picture of households reining in spending.

Britain is due to leave the European Union on March 29 but what will actually happen on that day remains far from clear.

The future of Prime Minister Theresa May’s deal struck with the EU hangs in the balance as a parliamentary vote looms, raising the possibility of Britain leaving the EU without a deal to smooth the economic shock.

Calls for a second referendum — which May has rejected — are growing.

Friday’s figures indicated that the disarray is starting to affect the economy.

Lending to consumers grew at its slowest pace in nearly four years in November and the number of mortgage approvals fell by far more than expected, the Bank said.

Nationwide said its house price index had grown in December at the weakest annual pace in nearly six years.

Overall, Britain’s economy looks on track for quarterly growth of just 0.1 percent in the fourth quarter, data company IHS Markit estimated, based on its monthly purchasing managers’ index (PMI) surveys of businesses.

November and December were the weakest two months for morale among services firms, which make up the bulk of the economy, since March 2009 — around the low point of Britain’s last recession — the PMI indicated.

“The latest UK services PMI provides further evidence that the economy has lost most, if not all, of the momentum it had last summer,” ING economist James Smith said.

The headline IHS Markit/CIPS UK services PMI rose slightly more than forecast by economists polled by Reuters, to 51.2 in December. But the increase was one of the slowest since the Brexit referendum in 2016.

“(Clarity) on Brexit is needed urgently in order to prevent the economy sliding into contraction,” said IHS Markit’s chief economist, Chris Williamson.

LENDING SLOWS

The Bank figures showed the annual growth rate in unsecured consumer lending had slowed to 7.1 percent in November from 7.4 percent in October, the smallest increase since March 2015.

The data chimed with signals from many retailers that consumers had reined in their spending in late 2018.

The number of mortgages approved for house purchase fell to 63,728 in November, the Bank said, the lowest figure since April.

Nationwide said house prices had fallen 0.7 percent from November, the biggest monthly fall since July 2012. Compared with a year earlier, prices were up just 0.5 percent compared with a 1.9 percent rise in the year to November.

Both readings were below all forecasts in a Reuters poll of economists.

Economist Samuel Tombs from the consultancy Pantheon Macroeconomics said the house price data amounted to “a bad end to the worst year since 2012”.

BoE Governor Mark Carney warned last month that in the event of a “disorderly” departure from the EU — which is not the central bank’s base-case scenario — house prices could plunge 30 percent as part of a broader economic shock.

Source: UK Reuters

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UK economy risks severe damage without orderly Brexit – CBI

Britain will struggle to achieve even modest economic growth next year unless the government secures an orderly Brexit in March, the Confederation of British Industry said on Thursday.

The CBI said the world’s fifth-largest economy would grow by 1.3 percent in 2018, 1.4 percent in 2019 and 1.6 percent in 2020, little changed from its previous projections in June.

The forecasts were slightly weaker than those of the Bank of England.

The CBI said it was assuming that Prime Minister Theresa May wins backing in parliament for her preferred plan for leaving the European Union, something which looks unlikely at a vote due on Dec. 11.

“A no-deal scenario would blow these figures out of the water,” the CBI’s director-general, Carolyn Fairbairn, said, reiterating her organisation’s support for May’s plan.

Last week, the BoE warned that a worst-case Brexit could deal a bigger blow to Britain than the 2008 financial crisis, shrinking the economy by as much as 8 percent in a year.

Economists at U.S. bank J.P. Morgan said on Wednesday the odds of Britain staying in the EU had risen to 40 percent from 20 percent, following parliamentary setbacks for May and the likelihood that the European Court of Justice will rule that Britain could unilaterally revoke its EU departure notice.

Before the 2016 referendum, the CBI argued that staying in the EU would be best for Britain’s economy.

Whilst the CBI expects real wage growth to recover partially, it predicts living standards will not rise much, due to Britain’s failure to tackle persistently weak productivity.

“Brexit has sucked the oxygen from the domestic agenda,” Fairbairn said.

Source: UK Reuters