Britain's recovery looks fragile

Recent data suggests Britain's recovery may be weaker than hoped.

745-crowd-634
Britain's consumers are cheery

Britain may not see a rapid recovery from the weak growth seen in the first quarter. Recent economic data have been disappointing the manufacturing sector picked up more slowly than expected in May, and surveys of the services sector have also disappointed.

Meanwhile, annual house-price growth dropped to 4.6% last month, the first sub-5% reading since 2013, according to Nationwide. However, mortgage approvals rose by over 6,000 in April, said the Bank of England, the biggest monthly gain in over six years. Consumer confidence remains near 13-year highs.

What the commentators said

A rate rise this year seems unlikely, agreed Capital Economics. But while the recovery is clearly still "a bit fragile", a "sustained slowdown" is unlikely. The main driver should be consumption, which accounts for around 60% of GDP. The labour market is still strengthening, earnings growth should keep climbing, and inflation has disappeared for now, bolstering real incomes.

Real household spending is on track to grow by 3% in 2015, the most in ten years. So with sterling strength squeezing manufacturers, Britain is once again relying on household spending to keep the show on the road, said Alex Brummer in the Daily Mail.

Chancellor George Osborne's vision of a UK "carried aloft by the march of the makers" looks more and more like "a Budget 2011 hallucination", said Alistair Osborne in The Times. Back then, manufacturing comprised 12.8% of GDP; now it's 10%. That's not a march it's "a limp". And it's domestic demand for consumer goods that is propping the sector up.

Of course, we are an economy dominated by sevices. But perhaps Osborne will let us know in next month's Budget where the high-tech exporters, crucial to the rebalancing he's always banging on about, have gone.

Recommended

Inflation is the easiest way out of this – just don’t expect politicians to admit it
Inflation

Inflation is the easiest way out of this – just don’t expect politicians to admit it

The UK government borrowed £34.1bn in December, a record amount for that month. Britain's debt pile now amounts to 100% of GDP. How are we going to pa…
22 Jan 2021
Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
A beginner’s guide to inflation – everything you need to know
Inflation

A beginner’s guide to inflation – everything you need to know

One of the most frequently mentioned topics in the news these days is inflation. But what exactly is inflation and how does it affect the economy and …
18 Jan 2021
Why the City should create a single financial market with the Swiss
Economy

Why the City should create a single financial market with the Swiss

A tie-up between London and Zurich, two global financial centres, could pay huge dividends for both, says Matthew Lynn.
17 Jan 2021

Most Popular

Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Prepare for the end of the epic bubble in US stocks
US stockmarkets

Prepare for the end of the epic bubble in US stocks

US stocks are as expensive as they’ve ever been. How can you prepare your portfolio for a bubble bursting?
18 Jan 2021
The best investment trusts to buy for 2021
Investment trusts

The best investment trusts to buy for 2021

Sectors ranging from emerging markets to student accommodation look poised to do well this year, says David Stevenson, as he picks the best investment…
19 Jan 2021