Recession fears stoked as UK manufacturing plunges

Galtero Lara
Octubre 10, 2019

Output in August alone dropped by 0.1 percent on the month versus economists' average forecast for it to hold steady, while growth in July was revised up to 0.4 percent, the Office for National Statistics (ONS) said.

He now thinks the economy could grow by 0.4% in the third quarter, more than he had originally expected.

The next quarter runs until the end of October so the August data is the second month in the third quarter.

"But even so, there's very little to cheer about in the United Kingdom economy at the moment", Smith said. Two consecutive quarters of contraction would mean the UK's economy met a commonly used definition of recession, but the ONS said the economy would need to shrink by an nearly unprecedented 1.5 percent in September alone for this to happen.

He added: "That pace of growth which is already weak would weaken further from a no-deal Brexit".

That growth was driven by services, production and public sector growth, offsetting the fall in construction.

Sterling edged up against the U.S. dollar following the stronger-than-expected data.

But a 0.2% decline in economic output in the three months to the end of June fanned worries that the United Kingdom was on the cusp of a recession - which is defined as two consecutive quarters of falling GDP.

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Economist Howard Archer said the United Kingdom had also suffered a tough September, with closely-watched sector surveys suggesting all three main parts of the economy fell in September.

The ONS said it had not received any good anecdotal evidence of the effect of Brexit preparations on the economy in August, when the annual rate of growth slowed to 1.1 percent from 1.3 percent, matching a seven-year low set in June.

However, the July upward revision means he is pencilling in growth of 0.4% overall in the third quarter.

The latest ONS three-month growth data has eased this pressure on the Bank, according to experts, though it may still be forced to react should the United Kingdom hurtle out of the European Union with no deal on October 31.

"Services provided [the] majority of the growth over the three months, with production and manufacturing falling back", said Rob Kent-Smith, head of GDP at the ONS.

Imported goods fell £9.2 billion to £118.8 billion in the three months to August.

The trade in goods deficit narrowed by £12.5 billion to £28.4 billion, according to the ONS.

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