More signs of economic slowdown as Britain’s trade deficit widens
There’s more bad news for the economy as output for production and construction has weakened and the trade deficit has widened. Even the weak pound has done little to push exports.
Figures published today by the Office for National Statistics (ONS) offered another bleak picture of the UK economy. Output for both construction and production fell compared to the last quarter and Britain’s trade deficit grew. So whilst the weak pound has made the cost of living more expensive for Brits, it hasn’t provided the boost to exports that was hoped.
In its production report, the ONS said production fell by 1.2% in the three months to May 2017 compared to the previous three months. Falls in manufacturing and energy supply were the main contributors. Within the manufacturing sector, output for motor vehicles, trailers and semi trailers provided the largest downward contribution. Already this week, the Society of Motor Manufacturers and Traders (SMMT) reported the number of new car registrations had fallen for the third month in a row in June.
Construction output also fell by 1.2% in the three months to May 2017 compared to the previous three. The ONS said the main downward pressure on construction came from new work.
This is on top of news earlier this week that PMI data for manufacturing, construction and services all showed weaker growth. And as with the construction output report, the PMI reports highlighted weaker growth in ‘new work’.
Basically, the only area that seems to be substantially growing is Britain’s trade deficit – which we want be shrinking!
The ONS report for trade showed the deficit grew to £8.9bn in the three months to May 2017 from £6.9bn in the previous three months. The ONS said this “reflects a higher rise in imports than the rise in exports of goods”. There was also a decrease in exports of services. The services sector makes up 80% of the UK economy and is an area that the UK has a trade surplus for. However, the Centre for Economics and Business Research estimate the UK risks losing between £25bn and £36bn in services trade when it leaves the single market.
The UK economy is looking pretty grim. And it’s hard to ignore Brexit’s impact on it. Since the referendum, the pound’s decline has led to rising inflation with Britons having less money in their pockets. Indeed, another ONS report published yesterday showed disposable income (after being adjusted for inflation) per person fell by 2% in the first three months of 2017 compared to the same period last year. The ONS put this down to increasing prices of goods and services.
In the Financial Times, Gemma Tetlow reports “the only other occasions in recent years to see such a sharp drop in disposable income were in 2011, when inflation was over 5%, and in 2008, when food and fuel prices rose rapidly”.
Today, business leaders will be meeting with Brexit secretary David Davis and other government officials to discuss their concerns over Brexit on business and the economy. As the Guardian reports, they will ask the government to seek a comprehensive transition phase that includes staying in the single market and customs union to avoid a cliff edge in March 2019.
We’ll have to see what comes out of it. For now, (at least in public), the prime minister continues to ignore the signs the economy is slowing down. Her response below to BBC News also indicates she’s in denial over statements made by businesses and the EU that it will be difficult to agree a comprehensive trade deal in the timeframe for Brexit negotiations.
— BBC News (UK) (@BBCNews) 7 July 2017