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

Budget 2021: Here is what Chancellor Rishi Sunak announced
Budget

Budget 2021: Here is what Chancellor Rishi Sunak announced

Rishi Sunak delivered his much anticipated Budget today. David Prosser explains what it means for you.
27 Oct 2021
What does Rishi Sunak have in store for investors this Wednesday?
Budget

What does Rishi Sunak have in store for investors this Wednesday?

Rishi Sunak is unveiling his spending plans for the economy this week. John Stepek analyses areas which may be most hit by the budget.
25 Oct 2021
Why we should scrap the Budget
Budget

Why we should scrap the Budget

The yearly Budget, big set-piece of British politics, encourages the very worst from the government, says Matthew Lynn.
24 Oct 2021
Why fed-up workers are quitting their jobs
Economy

Why fed-up workers are quitting their jobs

Workers are leaving their jobs at an astonishing rate, especially in the US, leading to a shortage of workers. What will that mean for our economies? …
22 Oct 2021

Most Popular

Properties for sale for around £1m
Houses for sale

Properties for sale for around £1m

From a stone-built farmhouse in the Snowdonia National Park, to a Victorian terraced house close to London’s Regent’s Canal, eight of the best propert…
15 Oct 2021
How to invest as we move to a hydrogen economy
Energy

How to invest as we move to a hydrogen economy

The government has started to roll out its plans for switching us over from fossil fuels to hydrogen and renewable energy. Should investors buy in? St…
8 Oct 2021
Emerging markets: the Brics never lived up to their promise – but is now the time to buy?
Emerging markets

Emerging markets: the Brics never lived up to their promise – but is now the time to buy?

Twenty years ago hopes were high for Brazil, Russia, India and China – the “Brics” emerging-market economies. But only China has beaten expectations. …
18 Oct 2021